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Coca-Cola, Green Mountain Coffee Deal Scalds SodaStream

NEW YORK (TheStreet) -- The Coca-Cola Company (KO - Get Report) is partnering with Green Mountain Coffee Roasters (GMCR - Get Report) in a deal that the world's largest beverage maker intends to use to develop an at-home cold drinks system. It's a small step towards beverage supremacy, and left SodaStream (SODA - Get Report) running scared.

Coca-cola has long had something of a cold war with SodaStream, the Israeli developer of a home appliance that carbonates water and cordials, and has held a near-monopoly in the do-it-yourself drinks niche for some time. Coca-Cola is keen to knock them off their pedestal. 

In extended trading, SodaStream shares had plummeted 9.2% to $32.49 while Green Mountain Coffee surged 38% to $111.89. Coca-Cola edged 1% higher to $37.99.

Coca-Cola intends to use its global distribution and marketing network to introduce Green Mountain's Keuring cold beverages system.

"This global relationship combines The Coca-Cola Company's unparalleled brand, distribution and marketing strengths with GMCR's innovative technology and beverage system expertise," said GMCR CEO Brian P. Kelley in a statement.

"By pairing The Coca-Cola Company's brand leadership and global footprint with GMCR's innovative technology, together we will be able to capitalize on the many exciting growth opportunities in the single-serve, pod-based segment of the cold beverage industry," added Coca-Cola CEO Muhtar Kent.

Green Mountain will act as exclusive partner for the development and sale of Coca-Cola Company-branded pod-based cold beverages, designed to be used at home and compatible with Green Mountain's to-be-released system. The partnership will not be limited to this project; the companies said they will explore future opportunities to collaborate on the Keurig platform.

As part of the agreement, the relationship will extend over 10 years and will see Coca-Cola purchase 16.6 million shares of Green Mountain for $1.25 billion. Green Mountain intends to use funds raised to finance a share repurchase program to reduce dilution to be executed under its existing $1.1 billion repurchase authorization.

The investment is expected to close in March 2014, subject to regulatory approval. GMCR's Keurig Cold beverage system is currently under development with an expected on-sale date in fiscal 2015.

Bank of America served as financial adviser to Green Mountain and Baker & McKenzie acted as legal adviser to the deal.

Must Read: Green Mountain Coffee Roasters Reports First-Quarter Results

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GMCR $127.58 2.15%
KO $43.30 1.98%
SODA $17.92 3.82%
AAPL $128.46 -1.50%
FB $78.97 -1.79%


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