Moody’s places Keurig Dr Pepper under review after JDE Peet’s deal

Investing.com -- Moody’s Ratings has placed Keurig Dr Pepper Inc.’s (NASDAQ:KDP) ratings under review for downgrade following the company’s announcement to acquire JDE Peet’s and subsequently split into two separate entities.

The review includes KDP’s Baa1 senior unsecured ratings and Prime-2 commercial paper rating, with the outlook changed from stable to ratings under review.

On Monday, KDP announced plans to purchase JDE Peet’s for €15.7 billion (approximately $18 billion) in an all-cash offer, while also assuming JDE’s approximate $4.6 billion of existing debt, bringing the total consideration to around $23 billion.

The acquisition will be financed through a combination of new senior unsecured and junior subordinated debt, along with cash on hand. Following the acquisition, KDP intends to separate into two independently owned entities: a North American focused beverage company (Beverage Co.) and a global coffee company (Global Coffee Co.).

Moody’s indicated that KDP’s senior unsecured ratings could be downgraded by up to two notches solely due to the JDE acquisition, though the company would remain investment grade. KDP has stated it is committed to maintaining investment grade profiles for both companies following the planned separation.

The rating agency estimates that KDP’s financial leverage, measured by Moody’s adjusted debt-to-EBITDA, will increase to high 5x from 4.0x as of June 30, 2025. The combined company is expected to generate revenue of approximately $28 billion with an EBITA margin of roughly 19%.

During the review, Moody’s will assess execution risks related to integrating the companies and then separating them, the operating outlook including potential synergies, KDP’s final capital structure, and the company’s long-term financial policy.

Moody’s views the decision to pursue a split-up as "aggressive and shareholder-focused," though KDP has committed to maintaining investment-grade profiles for both resulting companies.

KDP’s existing Baa1 rating reflects its well-known brand portfolio, product diversity, strong profitability, moderate financial leverage, and good liquidity. However, the company has smaller scale compared to major beverage competitors and more limited geographic reach, primarily focused on North America.

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