Keurig Dr Pepper to buy Peet's coffee for $18bn

US drinks giant Keurig Dr Pepper has agreed to buy Dutch coffee firm JDE Peet's for €15.7bn (£13.6bn, $18.4bn) in the largest European acquisition in more than two years.

Executives said the purchase was intended to create a "resilient and diversified" coffee business, forming a "global coffee champion" at a time when the industry is grappling with tariffs and high prices for coffee beans.

The companies plan to split into two US-listed firms after the merger, with one focused on coffee and the other on soft drinks.

Keurig Dr Pepper boss Tim Cofer said it was "the right time" for the transaction.

But shares in the firm sank more than 7% after the deal was announced amid concerns it was backing away from the strategy which created the US drinks behemoth - a merger between Dr Pepper's soda business and Green Mountain Coffee.

At the time, executives said they saw advantages in combining the distribution network, but it has struggled to deliver on that promise.

Last month, Keurig Dr Pepper executives told investors they expected growth in its coffee business to remain "subdued" this year, in part citing the hit from tariffs in the US, its most important market.

The new general soft drink business will be based in Texas and led by Mr Cofer.

Meanwhile the new merged coffee company, headquartered separately in Massachusetts, will boast a portfolio of brands representing $16bn in annual sales.

Executives said it would benefit from a global manufacturing footprint of more than 40 facilities.

Jacobs Douwe Egberts merged with Peet's in 2019, creating JDE Peet's, which was taken public the next year.

But the firm struggled to live up to expectations at a time when droughts in major coffee producing countries such as Brazil and Vietnam have driven up prices of raw coffee.

Earlier this year, it clashed with retailers in Europe over price increases, though it recently told investors it had resolved most of those disputes.

The deal values JDE Peet's shares at €31.85 apiece, about 20% higher than the price they fetched before reports of the deal started to circulate last week, though still below their 2020 peak.

The gains are a boon for JAB Holding Co, the investment firm owned by the German Reimann family, which held nearly 70% of the voting power in JDE Peet's.

It also owns about 4% of Keurig Dr Pepper.