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Investing.com - Keurig Dr Pepper (NASDAQ:KDP) stock fell in early trading Tuesday despite UBS maintaining its Buy rating and $40.00 price target on the beverage company. The stock, which has declined about 12% over the past year, is currently trading near its 52-week low of $30.12, according to InvestingPro data.
KDP announced it has entered into a definitive agreement to acquire JDE Peet’s in an all-cash transaction valued at €31.85 per share, or approximately €15.7 billion. Following the acquisition, KDP plans to separate into two independent, U.S.-listed companies through a tax-free spinoff. The $41.4 billion market cap company has maintained impressive gross profit margins of nearly 55% over the last twelve months.
The separation will create Beverage Co, which will house the North American beverage business, and Global Coffee Co, which is positioned to become the number one pure-play coffee company in the market. This transaction effectively unwinds the original 2018 combination of Green Mountain Coffee and Dr Pepper Snapple .
While the acquisition is expected to be accretive in the first year, UBS noted that investors might question where these entities would trade on a stand-alone basis and whether the combination and subsequent separation would unlock meaningful value.
KDP shares were indicating a decline of approximately 3.3% in pre-market trading, with UBS suggesting investors might be surprised by the announcement despite understanding the strategic merits of the combination from a coffee standpoint.
In other recent news, Keurig Dr Pepper announced its decision to acquire JDE Peet’s, a move that is expected to triple shareholders’ exposure to the coffee segment once the acquisition is completed in 2026. This acquisition has prompted various reactions from analysts and rating agencies. TD Cowen has maintained its Hold rating on the stock, setting a price target of $36.00, while RBC Capital reiterated its Outperform rating with a price target of $42.00. However, HSBC downgraded Keurig Dr Pepper from Buy to Hold, reducing its price target to $30.00 due to concerns about the company’s financial leverage following the acquisition announcement. Moody’s has also placed Keurig Dr Pepper’s ratings under review for a potential downgrade, reflecting uncertainties surrounding the acquisition and the planned split into two separate entities. To finance the $18.4 billion deal, Keurig Dr Pepper is considering a debt sale in the European bond market, as indicated by Chief Financial Officer Sudhanshu Priyadarshi. These developments highlight the mixed sentiment among analysts and investors regarding the company’s strategic direction and financial planning.
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