Keurig Dr Pepper (KDP) Cashes Out of Chobani to Clean Up its Books Before a Split
- KDP
Reuters reported that Keurig Dr Pepper Inc. (NASDAQ:KDP) said on September 1 that it will sell its entire equity stake in Chobani back to the yogurt maker for $800 million, plus a manufacturing facility and warehouse in Allentown, Pennsylvania, for $125 million, a combined $925 million.
KDP picked up the Chobani stake after a 2023 investment in coffee brand La Colombe, which Chobani later acquired for $900 million, rolling KDP’s equity into a Chobani stake. Chobani plans to invest about $1.2 billion over five years in the Allentown site, creating more than 900 jobs as part of a broader $4 billion investment across its manufacturing network. The sale continues KDP’s portfolio reshaping since its $18 billion acquisition of JDE Peet’s closed in April and comes as the company prepares to split into two separate public companies, Beverage Co. and Global Coffee Co., targeted for early 2027. KDP will keep distributing Chobani-owned beverages like La Colombe ready-to-drink lattes through its direct-store-delivery network and will maintain its La Colombe K-Cup licensing deal.
Bull Case
The $925 million proceeds give Keurig Dr Pepper Inc. (NASDAQ:KDP) extra cash to reduce leverage as the company prepares to split in two. The firm is targeting a pro forma management leverage ratio of 4.1x by year-end after taking on debt for the JDE Peet’s deal. The $925 million in cash moves that goal closer just as the company prepares to split in two.
The sale simplifies the portfolio ahead of that split. A minority dairy and protein-yogurt stake does not clearly belong in either a standalone Beverage Co. or Global Coffee Co. So shedding it now avoids carrying an awkward asset into the separation.
The core business funding this transition looks healthy. Legacy KDP sales rose 7.3% in constant currency in the second quarter, U.S. Refreshment Beverages posted 10% net sales growth and 11.9% operating income growth, adjusted earnings per share beat estimates at $0.57 versus $0.54 expected, and management reaffirmed full-year guidance of $25.9 billion to $26.4 billion in net sales.
KDP is not severing the commercial relationship, just the equity and manufacturing complexity. It keeps distributing Chobani-owned beverages through its retail network and keeps its La Colombe K-Cup licensing agreement, preserving upside from the partnership without the balance-sheet weight.
Bear Case
Keurig Dr Pepper Inc. (NASDAQ:KDP) is unwinding a bet it made just a few years ago. The company rolled its La Colombe investment into Chobani equity in 2023, and its own CEO called the partnership a success. So cashing out now, right as Chobani commits $1.2 billion to grow the very facility KDP is selling, raises the question of why KDP is stepping back from potential upside rather than staying in.
Source: finance.yahoo.com
