Keurig-JAB Merger Approved by Canada's Antitrust Authority

Keurig Green Mountain Inc.'s GMCR proposed merger with JAB Holdings recently received an approval from the Canadian anti-trust authority under the country's Competition Act.

On Dec 8, 2015, Keurig Green Mountain entered into a deal to be acquired by an investor group led by Germany's JAB Holdings for $13.9 billion or $92 a share. JAB is a private investment firm which owns majority stakes in coffee companies like Jacobs Douwe Egberts ("JDE"), Peet's Coffee & Tea as well as Caribou Coffee. The group also includes Mondelez International, Inc. MDLZ and affiliates of BDT Capital Partners.

Keurig Green Mountain has commented that since the anti-trust hurdle has been crossed, it will try to close the deal soon. Previously, the company expected to close the deal in first-quarter 2016. Post merger, Keurig Green Mountain will continue to operate independently as a privately owned entity.

The Coca-Cola Company KO, with around 17% stake in the specialty coffee retailer, reportedly stands to make a profit of about $25.5 million if the merger gets through. Prior to the announcement, this stake was reportedly worth a loss of approximately $1 billion.

Last week, the Keurig-JAB merger received shareholders' approval The approval seems to be a good decision as it will provide stakeholders with significant cash value, from the stock that has been losing value due to soft results and sluggish growth for some time. The company has been facing the brunt of intensifying competition and slower-than-expected adoption of the 2.0 brewing machines, primarily due to confusion regarding the brands that can be used with the devices.

Last September, Keurig launched a single-cup cold carbonated beverage maker — Keurig KOLD — the first beverage system that brews a range of cold sparkling and still beverages at home. It also makes popular beverage brands from Coca-Cola and Dr Pepper Snapple Group DPS. Reportedly, the rollout of Keurig KOLD has also been slower than expected. To add to its woes, the strengthening dollar is eroding international sales for the Zacks Rank #2 (Buy) company.

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