Keurig Dr Pepper Inc Shareholder Sell-Off

Shares in Keurig Dr Pepper Inc (NASDAQ:KDP) saw a decline of over 3.7% in premarket trading on Tuesday. This drop followed the announcement that JAB Holding, the beverage company’s largest shareholder, intends to sell 60 million shares in a secondary public offering at a price of $32.85 per share.

JAB Holding's Stakes

JAB Holding has also provided the underwriter with a 30-day option to purchase an extra 9 million shares. Currently, Europe-based JAB holds a 20.9% stake in KDP, as per LSEG data. After this offering, JAB’s ownership in KDP will reduce to approximately 16.5% of the company's outstanding shares, or about 15.8% if the underwriter fully exercises its option. JAB's remaining shares will be subject to a 90-day lock-up period with the underwriter.

Joachim Creus, managing partner, vice chairman, and CEO of JAB, remarked, "Keurig Dr Pepper has long been JAB's largest and most successful investment and will remain so following this transaction.` "He added that the decision reflects their confidence in the coffee sector and their continued commitment to KDP's future growth.

Market Reaction and Trends

Keurig's shares declined about 8% since its earnings report last week. Analysts from Wells Fargo noted that the stock is “getting too cheap, again.” They mentioned that a surprising miss in the Coffee segment contributed to the stock's recent weakness but emphasized that this decline more likely reflects investor positioning rather than any fundamental issues.

Leadership Changes

In conjunction with the stake reduction, Keurig Dr Pepper announced the appointment of Frank Engelen, Managing Partner and CFO of JAB, to KDP’s Board of Directors, taking over the position left vacant by Lubomira Rochet’s resignation. Engelen is set to serve until KDP’s annual shareholder meeting in 2025.

Creus stated, “As KDP Board members, Frank and I will continue to support the Company’s vision of providing a beverage for every need, anytime, anywhere.”

Strategic Acquisition

This news follows Keurig Dr Pepper's recent announcement regarding its acquisition of Ghost. Known for its flavors inspired by popular sweets like Sour Patch Kids and Oreo, Ghost was purchased for over $1 billion. This acquisition is aimed at expanding Keurig's appeal among younger consumers, as indicated in a company statement. According to Keurig, Ghost has witnessed rapid growth, with net sales quadrupling in the last three years.

This acquisition is Keurig's largest since its purchase of Dr Pepper Snapple Group in 2018 for nearly $19 billion, as noted by the Wall Street Journal.