(Adds comment from industry expert, background; updates shares)
By Maria Ajit Thomas
May 13 Coca-Cola Co plans to raise its
stake in Keurig Green Mountain Inc to 16 percent from
10 percent, which will make it the largest shareholder of the
maker of the popular Keurig one-cup coffee brewer.
Keurig's shares jumped as much as 12 percent in morning
trading on the Nasdaq. Coke's shares were up nearly 1 percent on
the New York Stock Exchange.
Coke's move to raise its stake within months of its initial
$1.25 billion investment in Keurig fits with its strategy of
investing in brands before eventually acquiring them.
Coke bought both Honest Tea and Zico, a coconut water brand,
a few years after initially picking stakes in them.
Coke said on Tuesday the additional 6 percent stake in
Keurig would be acquired over the next few months under an
accelerated purchase agreement with Credit Suisse.
"These incremental purchases demonstrate our continued
belief that Keurig Green Mountain has substantial growth
potential," Coke said in an emailed statement.
Jeff Cioletti, editor-in-chief of Beverage World magazine,
said Coke's move was interesting in light of recent speculation
that at-home soda maker Sodastream International was in
early talks to sell a stake of up to 16 percent.
In April, Israeli financial news daily Calcalist identified
PepsiCo Inc, Dr Pepper Snapple Group or
Starbucks Corp as potential investors in Sodastream.
"In some ways, (Coke's move) could be a preemptive measure
to get there first ... and assert itself in the custom-beverage
space," Cioletti said.
Coke and PepsiCo have been struggling with declining soda
sales in developed markets such as the United States as
consumers become more health conscious.
Under a 10-year agreement announced in February, Coke and
Keurig are developing a machine that will serve both carbonated
and non-carbonated drinks.
Keurig's machines use pods filled with coffee, tea or hot
chocolate powder to brew one-cup drinks at home.
Coke said in February it had bought a 10 percent stake in
Keurig, with the option to raise its holding to a maximum of 16
percent through open market purchases.
Once it completes the purchase, Coke will own about 26
million shares of Keurig, up from 16.7 million as of Feb. 27,
according to a regulatory filing. (link.reuters.com/qak39v)
Keurig's shares were up 9.7 percent at $121.49 in afternoon
trading on Tuesday. Up to Monday's close, the stock had risen
about 38 percent since Coke disclosed its initial stake.
Short interest in Keurig's shares had dropped to 8.7 percent
as of April 30 from 22 percent at the end of January before the
Coke deal was announced.
(Reporting by Maria Ajit Thomas in Bangalore; Editing by