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As a resident of Vermont, there aren’t many opportunities to invest in the stocks of local businesses. Those opportunities are about to get scarcer.
On Monday, it was announced that Luxembourg-based private equity firm JAB Holding Co. has agreed to purchase coffee company Keurig Green Mountain (NASDAQ: GMCR) for $13.9 billion. It’s the biggest coffee deal ever.
While I’ll be sad to see the GMCR symbol disappear from the Nasdaq ticker tape, the merger is a consolation prize for Keurig Green Mountain shareholders, who have weathered a disastrous year.
Keurig Green Mountain shares had fallen 61% year-to-date prior to the announcement. The stock jumped 74% at Monday’s opening, which was nearly in line with the $92 a share – a 78% premium – JAB agreed to pay for the outstanding shares.
The deal is also a minor victory for Coca-Cola (NYSE: KO), which stands to realize a $25 million profit from its 17.4% stake in Keurig, which is valued at $91 a share.
But Coca-Cola also has a reputational stake in the deal: Its Coke pods are one of the primary selling points of the Keurig Kold soft-drink brewer, which thus far has gotten a tepid response from consumers.
Kold Shoulder
Despite my Green Mountain State bias, I’m skeptical of Keurig Kold.
The primary selling point of the Keurig hot-brew system is convenience, particularly in an office setting. Gone are the days when employees were forced to either choke down the four-hour-old dregs at the bottom of a 12-cup coffee pot in the break room, or else endure the burdensome task of emptying the pot, disposing of the used filter, adding a new filter, properly measuring the ground coffee, adding an appropriate amount of water and pressing start – only to be forced to wait for the slow drip to conclude.
Now the only inconvenience is the inconsiderate coworker who failed to remove his K-Cup after use or lazily didn’t refill the water reservoir on the Keurig machine.
For soda pop drinkers, however, nothing beats the ease of cracking open an ice cold Coke from the office fridge.
It’s also a lot cheaper to practice 12-ounce curls. A 12-pack of 12-ounce Coke cans retails for around five bucks, while the cold-brew pods cost $4.99 for a four-pack of 8-ounce servings. Then there’s the cost of the Keurig Kold machine itself, which can fetch as much as $370 for the high-end model.
For both Keurig Green Mountain and Coca-Cola shareholders, the JAB outlay is a nice perk.
Disclaimer: I drank a Green Mountain Coffee K-Cup while writing this article.
Here are some of my favorite Wyatt Investment Research articles of the week:
The Best Energy Stocks for 2016 – Not all income is created equal. High yields aren’t everything. For the best energy stocks, it’s more about the companies’ ability to keep paying dividends. These three fit the bill.
Is the Pfizer Dividend in Jeopardy? – The $160 billion mega-merger of pharmaceutical colossi Pfizer Inc. (NYSE: PFE) and Ireland-based Allergan PLC (NYSE: AGN) is primarily a tax play. The new Pfizer will be domiciled in Ireland. Pfizer says the Allergan hookup, combined with its new Emerald Isle digs, will drop Pfizer’s effective tax rate down to 17% from 25%. But proponents of the Pfizer-Allergan merger might want to recall Pfizer’s 2009 takeover of Wyeth, which resulted in the Pfizer dividend being slashed in half.
How to Profit From the IMF’s China Currency Decision – On Nov. 30, the International Monetary Fund added China’s currency, known as the renminbi or the yuan, to its basket of reserve currencies. And 2015 had already been a watershed year for the yuan. It passed the Japanese yen as the fourth-most-used currency for trade and is rapidly closing on the British pound for No. 3. Here’s how to play it.
A Safe 9% Dividend Yield in a Unique Insurance Stock – Many insurers will actually accept an underwriting loss in order to collect premiums to invest. Nearly all insurers invest premiums received in a portfolio of fixed-income and equity investments. But this Bermuda-based company makes its money underwriting insurance and backs its policies with cash and short-term Treasury securities in the equivalent amount of its maximum liability. This approach insulates the company from the market risk that virtually all other insurers are exposed to.
What Recession? Canadian Bank Earnings Climb North – The Canadian economy fell into a recession earlier this year after two consecutive quarters of contracting gross domestic product. But despite a tough business environment, certain Canadian banks managed to grow their bottom lines by cutting costs and pursuing a diversified growth strategy.
A Must-Own Holiday Stock – The holiday shopping season is in full effect, but it’s not the retail stocks you should be focusing on. Instead, look to this shipping stock that stands to benefit from the trend of retailers holding less in-store inventory, which should lead to more reorders.
A Technology REIT to Power Your Portfolio – The fear of an interest rate hike has caused real estate investment trust share prices to decline throughout the year. However, one technology REIT with a high-quality tenant portfolio and a 93% portfolio occupancy rate is bucking the trend.
Warren Buffett Personally Invests $70 Million in Sears REIT – Real estate has never been Warren Buffett’s forte. So why did he take an 8% stake in the Sears REIT spinoff?
Have a great weekend!