(CN) — The board at Dr. Pepper Snapple Group agreed to a buyout by coffee giant Keurig, the companies revealed Monday, saying their combined annual sales are expected to top $11 billion.
Such revenues are still far outstripped by industry leaders PepsiCo Inc. and Coca-Cola Co., which reported sales of $63 billion and $41 billion in 2016, respectively.
Keurig CEO Bob Gamgort will step into the role of leading the combined company, a position he will hold in Burlington, Massachusetts.
Apart from Gamgort’s office, operations will continue for Keurig and Dr. Pepper Snapple at their bases in Waterbury, Vermont, and Plano, Texas, respectively.
Keurig said the current head of Dr. Pepper Snapple, Larry Young, will join the board of directors of the new company, which will keep Keurig CFO Ozan Dokmecioglu in the same position. Dr. Pepper Snapple will appoint one other director to the board.
The buyout includes $103.75 per share in a special cash dividend for Dr. Pepper Snapple shareholders, who will keep 13 percent of the combined company.
News of the merger sent shares of the soda company up more than 39 percent before the opening bell Monday.
A leader in single-serve brewing systems, Keurig has been privately held since its acquisition in March 2016 by an investor group led by JAB Holding Co.
The company says those last two years saw Keurig increase U.S. household penetration for Keurig brewers to 20 percent from 17 percent. Pod growth grew from the low-single digits to mid-single digits in the second half of calendar year 2017, the company says.
Bart Becht, of JAB, will serve as chairman of the board of directors of the combined company. In addition to CEO Gamgort, who will become an executive member of the board, JAB will appoint four additional directors.
Mondelez International, which partnered with JAB in the acquisition of Keurig, will hold a stake of approximately 13-14 percent in the combined company, whose board of directors will be rounded out with two Mondelez appointees and two independent directors.
Dr. Pepper Snapple’s fleet of more than 50 beverage brands includes sodas like 7UP, A&W, Canada Dry and Schweppes, mixers like Clamato and Mr & Mrs T mixers, and fruit blends like Crush, Hawaiian Punch, Mott’s and Sunkist.
The merger is expected to close in the second quarter. Keurig says it anticipates total net debt at closing to be about $16.6 billion.
Though the Dr. Pepper Snapple board has approved the deal, it must now go before shareholders.