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Fundamental View
AS OF 12 Nov 2025Historically, KDP has benefited from exposure to faster growing, higher margin beverage & coffee categories. However, the credit story is current dominated by the pending acquisition of JDE Peet’s, and plans to separate the coffee and beverage businesses.
Pro forma for the initial merger, KDP will have net leverage of 4.6x (vs 3.3x at MRQ), with plans to delever thereafter. Management expects both standalone entities to maintain investment grade ratings, but leverage will likely be elevated out of the gate.
KDP has a successful track record of deleveraging after past M&A. We like the growth outlooks of the proposed standalone entities, and think the new issue to fund the acquisition will likely present a good opportunity to add exposure to the name.
Business Description
AS OF 12 Nov 2025- KDP is the result of a July 2018 merger between Dr Pepper Snapple and Keurig Green Mountain. The merger combined a traditional soft drinks company (DPS) with a faster growing coffee platform that includes the market's leading single serve brewing system.
- The merger was backed by JAB Holdings via its affiliate, Maple Holdings BV. While JAB has trimmed its stake in recent periods, it still controls ~16% of the shares.
- KDP recorded $15.4 bn in 2024 net sales with adjusted EBITDA of $4.5 bn. The business is heavily concentrated in North America, and results are reported across three operating segments: U.S. Refreshment Beverages (61% of 2024 sales), U.S. Coffee (26% of sales), and International (13.0% of sales).
- Examples of KDP's key brands include Dr Pepper, Keurig, Snapple, Canada Dry, 7Up, Mott's, and A&W. The company also partners with other leading coffee brands from various producers via licensing and manufacturing agreements for K-cups.
- KDP signed a definitive agreement to acquire JDE Peet's for $22+ bn in August. The deal is expected to close in 1H26. Subsequently the company intends to separate the business into two standalone entities: Global Coffee Co and Beverage Co.
Risk & Catalysts
AS OF 12 Nov 2025The KDP-JDEP acquisition ($22 bn) is anticipated to close in 1H26, with the goal of being separation ready by year-end 2026. Management reiterated its $400 mn synergy target over three years.
The coffee industry is currently experiencing intense cost inflation, and price elasticity has increased, challenging cost passthrough.
Post-split, BeverageCo will target 3.5-4.0x net leverage and Global CoffeeCo will target 3.75-4.25x net leverage. There is still uncertainty where legacy bonds will end up, but we tend to see BeverageCo ending up as RemainCo. It is also unclear what pf net leverage will be at the standalone entities. If BeverageCo is RemainCo, we expect some level of debt repayment following a spin/sale of Global CoffeeCo.
Key Metric
AS OF 12 Nov 2025| $ mn | Y21 | Y22 | Y23 | Y24 | LTM 3Q25 |
|---|---|---|---|---|---|
| Revenue | 12,683 | 14,057 | 14,814 | 15,351 | 16,174 |
| EBITDA | 3,908 | 3,932 | 4,189 | 4,528 | 4,678 |
| EBITDA Margin | 30.8% | 28.0% | 28.3% | 29.5% | 28.9% |
| EBITDA-CAPEX-INT % of Revenues | 23.5% | 20.5% | 21.7% | 21.6% | 21.7% |
| Total Debt | 12,024 | 12,104 | 13,308 | 15,595 | 15,846 |
| Net Debt | 11,457 | 11,569 | 13,041 | 15,085 | 15,330 |
| Net Leverage | 2.9x | 2.9x | 3.1x | 3.3x | 3.3x |
| EV / EBITDA | 16.3x | 15.8x | 14.2x | 13.0x | 10.7x |
CreditSight View Comment
AS OF 28 Oct 2025KDP signed a definitive agreement to acquire JDE Peet’s for $22+ bn in August. The deal is expected to close in 1H26. Subsequently the company intends to separate the business into two standalone entities: Global Coffee Co and Beverage Co. Initially, the company contemplated out of the gate pf net leverage, but after pushback from investors, the company is swapping debt financing for PE investments that will reduce pf net leverage to 4.6x. The separation is expected to be ready by year-end 2026. Management will target 3.5-4.0x net leverage at Beverage Co and 3.75-4.25x leverage at Global Coffee Co. We see the new issuance for the merger as a good opportunity to add exposure to the credit.
Recommendation Reviewed: October 28, 2025
Recommendation Changed: October 28, 2025
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