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Dr Pepper Snapple Group Inc. (NYSE:DPS)'s decision to sell itself to Keurig Green Mountain was an "unexpected" move, according to one of Wall Street's top beverage analysts.
The Analyst
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Deutsche Bank's Steve Powers discussed the M&A deal during CNBC's "Squawk Box" segment Tuesday.
The Thesis
Dr Pepper Snapple's name has been floated in the past as a takeover candidate, mostly from other "traditional members" of the soft drink industry, Powers said. Keurig's takeover of Dr Pepper Snapple is "out of left field," which may have resulted in more questions being asked than answered, he said
For instance, the strategic rationale behind the deal is unclear, as "Dr Pepper can sell on Amazon without Keurig, and Keurig can sell in convenience stores without Dr Pepper."
Powers previously rated Dr Pepper's stock with a Buy amid a view that the stock boasted "intrinsic value that was underappreciated by the market" — and it could be that Keurig's parent company JAB Holdings felt the same way.
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The merger could be seen as a "back door way" for Europe-based JAB Holdings to IPO the Vermont-based maker best known for its single-serve coffee machines, Powers said. Doing so would provide a pathway for JAB Holdings to monetize its investment after buying Keurig in 2015 and taking it private.
JAB Holdings is acquiring a "solid asset" in Dr Pepper Snapple and a path of liquidity for its Keurig investment, Powers said.
Price Action
Shares of Dr Pepper Snapple Group were trading higher by 1.77 percent midday Tuesday.
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Photo courtesy of Dr Pepper.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.