Keurig Dr Pepper Announces Pricing of up to 100 million Shares of Common Stock by JAB and Repurchase of 35 million Shares by KDP

Rhea-AI Summary

Keurig Dr Pepper Inc. (KDP) announced a public offering of 86,956,522 shares at $29.10 per share, with an option for additional shares. KDP plans to repurchase 35 million shares in the offering and JAB will own about 21% of KDP's stock post-offering. Morgan Stanley is the underwriter.

Insights

Financial Analyst

The announcement by Keurig Dr Pepper Inc. (KDP) regarding the pricing of its secondary public offering and the concurrent share repurchase represents a strategic move that could influence investor sentiment and the company's capital structure. The pricing of shares at $29.10 indicates the company's valuation from the perspective of the underwriter and the market's current appetite for KDP's stock. The repurchase of 35 million shares is a significant buyback, signaling confidence from management in the company's intrinsic value and a potential effort to provide support to the share price following the dilutive effect of the secondary offering.

From a financial perspective, the repurchase will reduce the number of outstanding shares, potentially leading to an increase in earnings per share (EPS) and a more favorable debt-to-equity ratio. However, investors should be mindful of the $1.8 billion remaining in the repurchase authorization, as this could indicate further buybacks, influencing future liquidity and leverage levels. The lock-up agreement for the remaining shares held by JAB is a standard measure to prevent market flooding and price destabilization post-offering.

It is also noteworthy that following the offering and repurchase, JAB will own approximately 21% of KDP's common stock, which may affect control dynamics and corporate governance. The public float increasing to roughly 79% could enhance stock liquidity, potentially attracting more institutional investors.

Market Research Analyst

The secondary offering and share repurchase by KDP should be evaluated within the context of the broader beverage industry and market trends. The offering size and repurchase decision may reflect KDP's strategic initiatives such as investment in growth opportunities, debt reduction, or other corporate activities. The use of a secondary offering to facilitate a share repurchase is somewhat less common and could be interpreted as a way to balance the interests of existing shareholders with the need to raise capital or provide an exit for a significant shareholder like JAB.

Considering the competitive landscape, KDP's actions could be a response to the need for increased financial flexibility to invest in innovation or marketing in a market where consumer preferences are rapidly evolving. The involvement of a prominent underwriter like Morgan Stanley could also be seen as a vote of confidence in the company's financial health and future prospects.

Investors will likely monitor the impact of these transactions on KDP's market capitalization and how it compares to its peers. Additionally, the increase in public float could affect the stock's volatility and how it is traded, which is relevant information for stakeholders making decisions based on market dynamics.

Legal Expert

The legal framework surrounding the secondary offering and share repurchase is critical for ensuring regulatory compliance and investor protection. The use of a Form S-3 registration statement indicates that KDP is utilizing a shelf registration, which allows for the efficient sale of securities, providing the company with flexibility to act quickly in favorable market conditions. Investors should understand that the SEC requires comprehensive disclosure in the prospectus and registration statement to ensure transparency regarding the company's financial status and the risks involved in the offering.

The 180-day lock-up agreement is a contractual obligation that prevents JAB from selling additional shares for a specified period, which is a common practice in secondary offerings to manage supply and demand dynamics effectively. The lock-up period helps mitigate the risk of share price depreciation due to potential oversupply. Legal considerations also extend to the underwriter's due diligence process, ensuring the accuracy of the disclosed information and protecting against potential securities fraud.

BURLINGTON, Mass. and FRISCO, Texas, Feb. 29, 2024 /PRNewswire/ -- Keurig Dr Pepper Inc. (NASDAQ: KDP) (the "Company" or "KDP") today announced the pricing of its previously-announced public offering of 86,956,522 shares through a registered secondary offering, at a price to the public of $29.10 per share. JAB has also granted an option to the underwriter to purchase up to an additional 13,043,478 shares for a period of 30 days following the date of the offering.

KDP has indicated its intent to repurchase an aggregate of 35 million shares in this offering (the "Repurchase") at the per share price to be paid by the underwriter in the offering. The Repurchase is being effected under its previously announced $4 billion repurchase authorization of which approximately $1.8 billion will remain outstanding following the offering.   

Following the completion of the offering, assuming full exercise of the underwriter's option to purchase additional shares, JAB will beneficially own approximately 21% of KDP's outstanding common stock, giving effect to the Repurchase, bringing KDP's public float to approximately 79%.

Under the terms of the transaction, the remaining shares beneficially owned by JAB will be subject to a 180 day lock-up agreement with the underwriter.

Morgan Stanley is acting as the underwriter for the offering.

The offering will be made only by means of an effective registration statement and a prospectus. The Company has previously filed with the U.S. Securities and Exchange Commission (the "SEC") a registration statement (including a prospectus) on Form S-3 (File No. 333-266989) and a prospectus supplement, each dated August 19, 2022, as well as a preliminary prospectus supplement for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement, the accompanying prospectus supplements and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. These documents can be accessed through the SEC's website at www.sec.gov or by contacting Morgan Stanley & Co. LLC, Attn: Prospectus Department, 180 Varick Street, 2nd Floor, New York, NY 10014. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

Investor Contacts:
Jane Gelfand
T: 888-340-5287
jane.gelfand@kdrp.com 

Chethan Mallela
T: 888-340-5287
chethan.mallela@kdrp.com 

Media Contact:
Katie Gilroy
T: 781-418-3345
katie.gilroy@kdrp.com

About Keurig Dr Pepper

Keurig Dr Pepper (KDP) is a leading beverage company in North America, with annual revenue of more than $14 billion and approximately 28,000 employees. KDP holds leadership positions in liquid refreshment beverages, including soft drinks, specialty coffee and tea, water, juice and juice drinks and mixers, and markets the #1 single serve coffee brewing system in the U.S. and Canada. The Company's portfolio of more than 125 owned, licensed and partner brands is designed to satisfy virtually any consumer need, any time, and includes Keurig^®, Dr Pepper^®, Canada Dry^®, Clamato^®, CORE^®, Green Mountain Coffee Roasters^®, Mott's^®, Snapple^®, and The Original Donut Shop^®. Through its powerful sales and distribution network, KDP can deliver its portfolio of hot and cold beverages to nearly every point of purchase for consumers. The Company's Drink Well. Do Good. corporate responsibility platform is focused on the greatest opportunities for impact in the environment, its supply chain, the health and well-being of consumers and with its people and communities.

FORWARD LOOKING STATEMENTS

Certain statements contained herein are "forward-looking statements" within the meaning of applicable securities laws and regulations. These forward-looking statements can generally be identified by the use of words such as "outlook," "guidance," "anticipate," "expect," "believe," "could," "estimate," "feel," "forecast," "intend," "may," "plan," "potential," "project," "should," "target," "will," "would," and similar words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain. These statements are based on the current expectations of our management, are not predictions of actual performance, and actual results may differ materially.

Forward-looking statements are subject to a number of risks and uncertainties, including the factors disclosed in our Annual Report on Form 10-K, the prospectus supplements and subsequent filings with the SEC. We are under no obligation to update, modify or withdraw any forward-looking statements, except as required by applicable law.

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SOURCE Keurig Dr Pepper

FAQ

How many shares were offered by Keurig Dr Pepper Inc. (KDP) in the public offering?

Keurig Dr Pepper Inc. (KDP) offered 86,956,522 shares in the public offering.

At what price per share did Keurig Dr Pepper Inc. (KDP) price the public offering?

Keurig Dr Pepper Inc. (KDP) priced the public offering at $29.10 per share.

Who granted an option for additional shares in Keurig Dr Pepper Inc. (KDP) public offering?

JAB granted an option for additional shares in Keurig Dr Pepper Inc. (KDP) public offering.

How many shares does KDP plan to repurchase in the offering?

KDP plans to repurchase 35 million shares in the offering.

Who is acting as the underwriter for Keurig Dr Pepper Inc. (KDP) offering?

Morgan Stanley is acting as the underwriter for Keurig Dr Pepper Inc. (KDP) offering.