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There was some big M&A news in the beverage space this morning. Keurig Dr Pepper (KDP -8%) announced plans to acquire Amsterdam-based JDE Peet's for €31.85 per share in cash, a 20% premium to Friday's close, for a total equity value of €15.7 bln. The deal pairs KDP's Keurig single-serve coffee platform with JDE Peet's portfolio of beloved coffee brands. KDP forecasts $400 mln in cost synergies and that the deal will be immediately EPS accretive.

• And that's not all. After the acquisition closes, KDP plans to separate into two independent, yet to be named, US-listed publicly traded companies. This will create a growth-focused North America refreshment beverage company ("Beverage Co.") and the world's #1 pure-play coffee company ("Global Coffee Co.").
• Each business will have a distinct growth model and specific capital allocation priorities. CEO Tim Cofer will be CEO of "Beverage Co." and CFO Sudhanshu Priyadarshi to be CEO of "Global Coffee Co." upon separation.
• On the coffee side, it will be the number one global category pure play as its brings together Keurig's single-serve coffee platform with JDE Peet's portfolio, creating a global leader across all coffee segments and markets. JDE Peet's is so compelling to KDP because it owns iconic brands and is highly profitable with $11+ bln in annual sales and almost $2 bln in adjusted EBITDA. JDE Peet's is huge outside the US with leadership positions in 40 markets. However, its US business is largely limited to Peet's. Keurig sees an opportunity to boost its US presence, the largest coffee market in the world.
• On the beverage side, KDP envisions a growth-oriented, agile company. It's the largest flavored carbonated soft drink portfolio in the US, led by powerhouse $5 bln+ brand Dr Pepper and $1 bln+ brand Canada Dry, as well as iconic favorites like 7UP and A&W, and more than $3 bln in high-growth categories like energy and functional beverages.

Briefing.com is generally a fan when companies separate, especially when we do not see a lot of synergies between the segments, like we do here with coffee and carbonated soft drinks. We also suspect the recent 50% tariffs levied on Brazil were part of the calculation for this deal. Brazil is the world's largest producer and exporter of coffee, accounting for about 30--35% of the global coffee market. While the tariffs may be short term, KDP has warned of margin pressures in 2H. Growing in scale is a good way to combat this. Finally, KDP is sharply lower on the deal, we think investors are perhaps not thrilled about the pretty hefty premium being paid.