Keurig Dr Pepper (KDP) is set to acquire JDE Peet’s for of €15.7 billion ($18.37 billion) in an all-cash transaction. 

After the acquisition closes, KDP plans to separate into two independent, U.S.-listed publicly traded companies, creating a refreshment beverage company (Beverage Co.) and a global coffee company (Global Coffee Co.).

KDP says the acquisition of JDE Peet’s will enhance its coffee positioning, creating a diversified global portfolio. The company says the transaction will unlock incremental operating and financial benefits, including approximately $400 million in anticipated cost synergies to be realized over three years and EPS accretion expected to start in year one of the combination.

Upon separation, Global Coffee Co., with approximately $16 billion in combined annual net sales, will be the world’s largest pure-play coffee company. With reach across more than 100 countries, including 40 in which the company holds the No. 1 or No. 2 market position by sales, Global Coffee Co. will offer a portfolio across all coffee segments, channels and price points, with brands including Keurig, Jacobs, L’OR and Peet’s.

Beverage Co., with more than $11 billion in annual net sales, will be a challenger in the $300 billion North American refreshment beverage market. With its brand portfolio including Dr Pepper, Canada Dry, 7UP and A&W, a differentiated and expanding direct-store-delivery (DSD) system, and a capital-efficient growth model, Beverage Co. will benefit from multiple drivers.

“Today’s announcement marks a transformational moment in the beverage industry, as we build on KDP’s disruptive legacy by creating two winning companies, including a new global coffee champion,” says KDP CEO Tim Cofer. “Through the complementary combination of Keurig and JDE Peet’s, we are seizing an exceptional opportunity to create a global coffee giant. This is the right time for this transaction, with KDP in a position of operational and financial strength, momentum across our evolved portfolio, and increasing coffee category resilience. By creating two sharply focused beverage companies with attractive and tailored growth propositions and capital allocation strategies, we are poised to generate significant shareholder value in both the near and long term.”

Upon completion of the separation, Cofer will become CEO of Beverage Co. and KDP CFO Sudhanshu Priyadarshi will become CEO of Global Coffee Co. Rafa Oliveira will continue to serve as CEO of JDE Peet’s until the closing of the acquisition. Additional members of leadership and Boards of Directors for both companies will be announced later. 

The global headquarters for Global Coffee Co. will be located in Burlington, Massachusetts, and its international headquarters will be in Amsterdam, the Netherlands. Beverage Co. will be headquartered in Frisco, Texas.

“We are excited to join forces with Keurig to chart the future of global coffee by leveraging our combined portfolio of the world’s most beloved coffee brands,” Oliveira says. “This highly complementary transaction will deliver an attractive premium for our shareholders and will create compelling future growth opportunities for our employees, customers and other stakeholders. We are incredibly proud of the formidable global platform that we have built at JDE Peet’s and, together with Keurig, we are looking forward to powering a new era of coffee innovation and leadership, building on JDE Peet’s recently announced ‘Reignite the Amazing’ strategy.”

Under the terms of the transaction, KDP will pay JDE Peet’s shareholders €31.85 ($37.27) per share in cash, a 33% premium to JDE Peet’s 90-day volume-weighted average stock price. JDE Peet’s will also pay a previously declared dividend of €0.36 ($0.42) per share prior to closing, with no reduction to the offer price.