KDP

Keurig Dr Pepper Inc

Consumer, Event Driven/Special Sit


Presented:04/05/2018
Price:$14.90
Cap:$21.45B
Current Price:$36.92
Cap:$50.07B

Presented

Date04/05/2018
Price$14.90
Market Cap$21.45B
Ent Value$21.92B
P/E Ratio20.11x
Book Value$13.64
Div Yield1.96%
Shares O/S180.80M
Ave Daily Vol2,484,115
Short Int3.99%

Current

Price$36.92
Market Cap$50.07B
Dr Pepper Snapple Group, Inc. engages in the manufacturing, marketing and distribution of non-alcoholic beverages. It operates through the following segments: Beverage Concentrates, Packaged Beverages, and Latin America Beverages. The Beverage Concentrates segment involves in manufacturing and selling carbonated soft drinks and other branded concentrates and syrup. The Packaged Beverages segment offers manufacturing and distribution of packaged beverages and other products through both direct store delivery system and warehouse direct delivery system. The Latin America Beverages segment includes manufacturing and distribution of concentrates, syrup and finished beverages. The company was founded on October 24, 2007 and is headquartered in Plano, TX.

Please note, on 7/9/18 Dr Pepper Snapple Group, Inc. (DPS) merged with and changed it’s company name and ticker to Keurig Dr Pepper Inc. (KDP). The content of this idea will make reference to the original company name and ticker symbol. As well, they paid a $103.75 special dividend on 7/10/18 so we have adjusted the presented price from $118.65 to $14.90. The text may make reference to the original price.

Publicly traded companies mentioned herein: Coca-Cola Co (KO), Dr Pepper Snapple Group Inc (DPS), PepsiCo Inc (PEP)

Highlights

The pending Dr Pepper Snapple (DPS)/ Keurig deal presents a compelling risk/reward and the presenter is long the stock at $118.50. The transaction is expected to close in June 2018, and it’s somewhat complex. Interested investors will need to take the tax treatment of the payout(s) into consideration (his numbers are non-taxed, as he does not pay US taxes), as shareholders will receive $103.75 in cash and retain 13% of the newco. The stub looks like it will be trading at around $15 - $16, which is attractive as earnings could be $1.10/share this year, and guidance is $1.30/share looking out two years. Using a high teens multiple to earnings for what can be expected to be “at least a mid-teens earnings grower”, it’s reasonable to think the stock could trade up to $30 if management can execute.

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Idea Discussion

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