Dr Pepper Snapple Group Inc. (NYSE:DPS) is planning to purchase antioxidant drink maker Bai Brands.
Dr Pepper Snapple Group Inc. will spend $1.7 billion to acquire Bai Brands. This takes into account for a $400 million tax benefit. The company said it plans to use new unsecured notes and short term commercial paper to fund the deal.
Dr Pepper Snapple Group Inc. pointed out that Bai Brands is set to pull in $425 million in revenue in 2017. This will add $132 million to DPS’ own sales for that period. The company also said that the acquisition will hurt its earnings per share by 3 cents in 2017. It claims this will be due to an increase in marketing investments and the deal to acquire the brand. However, 2018 should see Bai Brands add to the company’s earnings per share.
The Boards of Dr Pepper Snapple Group Inc. and Bai Brands have both approved of the deal. Once completed, Bai Brands will be added to DPS’ Packaged Beverages segment. It will still be led by founder Ben Weiss.
“Bai has contributed greatly to our allied brand lineup since we began distributing it broadly in 2013,” Larry Young, President and CEO of Dr Pepper Snapple Group Inc., said in a statement. “Adding it to the broad range of choices and options in our company-owned portfolio is a natural next step.”
Dr Pepper Snapple Group Inc. is expecting the deal for Bai Brands to close during the first quarter of 2017. The company still needs to complete customary closing conditions before the acquisition can finish.
DPS stock was up 2% as of Tuesday afternoon.
