Keurig Dr Pepper scouts deals after nixing talks with Bang Energy
Keurig Dr Pepper is scouting for a new energy drink brand after ending talks to buy Bang Energy, with potential targets including C4 Energy, Richard writes.
- "We have no desire to sell Bang Energy," CEO Jack Owoc tells Richard. "My guess is that (Keurig Dr Pepper) might be in talks with C4. KDP’s energy portfolio represents less than 1% of sales."
- C4, a subsidiary of Nutrabolt, has been held by private equity firm MidOcean Partners since 2014.
Why it's the BFD: The buzz around such brands, deal or no deal, makes sense, considering how frenzied that M&A market has been.
- Constellation Brands was previously reported to be in talks to merge with Monster Beverage, while PepsiCo invested $550 million in Celsius this month.
What's happening: Bloomberg reported last week that Keurig Dr Pepper was in talks to acquire Bang. Keurig Dr Pepper has since said it is not currently pursuing Bang.
What they're saying: Asked about its interest in acquiring C4 or another energy drink brand, a Keurig Dr Pepper spokesperson said:
- “Our top capital allocation priority is growing our business through M&A and brand/distribution partnerships, which we have proven we can execute to create value. Therefore, we look at a lot of opportunities and we don’t pursue many of them.”
- MidOcean declined to comment. Nutrabolt did not respond to requests for comment.
By the numbers: Bloomberg's report from Aug. 18 said Bang could be valued at $2 billion or more, or in excess of $3 billion.
- "Bang sales (are) $5 billion in just the past few years and $1.44 billion last year," Owoc says.
- "Let’s look at some recent comps," Owoc says. "Rockstar sold to Pepsi for $4.55 billion ($3.85 billion and $700 million in tax credits) with ~50 consecutive negative growth reads and now has ~60% less market share than Bang Energy."
Yes, and: Owoc notes that "Rockstar and Celsius (are) number 4 and 5 in the energy drink category."
- "Celsius just did a deal with Pepsi based on a $6.5 billion valuation with ~4% market share."
- "Bang has a roughly 57% larger market share of the energy drink category (~6.3%) than Celsius."
- "Using the $6.5 billion Celsius valuation and the same market share calculation, Bang Energy would be valued at $10.2 billion."
- "This far exceeds the $2 billion to $3 billion valuation reported by Bloomberg," Owoc concludes.
What we're watching: However you do the math, it's clear the energy drink M&A market is frothy — and we'll be interested to see how Keurig Dr Pepper proceeds.