Keurig Dr Pepper (KDP.US) receives $7 billion investment from Apollo and KKR, will split into two giants in global coffee and North American beverages. Stock price soars in response.

Keurig Dr Pepper (KDP.US) released its third-quarter financial report on Monday Eastern Time, detailing its strategic plans, management changes, and financing arrangements related to the acquisition of JDE Peet's. As part of this deal, Keurig Dr Pepper will be split into two independent companies, one becoming a global coffee giant and the other a leading beverage company in North America. In the company's third-quarter report, Q3 total revenue was $4.31 billion, exceeding analysts' expectations of $4.15 billion, with earnings per share of $0.54, in line with analysts' consensus. To support this acquisition, Keurig Dr Pepper announced a new financing plan, including two new strategic investments led by Apollo Global Management Inc (Apollo Global Management, APO.US) and KKR Group (KKR.US), totaling $7 billion. The financing plan includes two parts: a $4 billion investment in the coffee capsule production joint venture and a $3 billion investment in convertible preferred shares for Keurig Dr Pepper and its future beverage business. As a result, Keurig Dr Pepper expects its net leverage ratio to decrease to approximately 4.6 times upon completion of the transaction, and adjusted earnings per share are expected to increase by approximately 10% in the first full year post-acquisition. Management at Apollo and KKR expressed strong confidence in the strategic direction, management quality, and long-term growth opportunities of the two companies post-separation. Apollo's Jamshid Ehsani and Matt Nord stated, "Our investment reflects our strong confidence in the Global Coffee Co. and Beverage Co. We believe that both companies will drive long-term value creation as leaders in their respective fields with strong leadership, focused operating models, and optimized capital structures." TD Cowen analyst Robert Moskow noted that the investment announcement by Apollo and KKR is significant and positive. He stated that since the merger news was announced, Keurig Dr Pepper's stock price has dropped over 20%, but the investment announcement is expected to provide support for it. Keurig Dr Pepper closed up 7.62% on Monday, and as of the time of writing, the stock was up 0.14% after hours.