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Green Mountain Coffee Roasters Inc. (GMCR) Sky High on Coca-Cola (KO) Deal

by Marie Cabural - February 6, 2014

Post image for Green Mountain Coffee Roasters Inc. (GMCR) Sky High on Coca-Cola (KO) Deal

The shares of Green Mountain Coffee Roasters, Inc (NYSE:GMCR) skyrocketed more than 45% during the extended hours trading on Wednesday following announcement that it entered a global strategic agreement with The Coca-Cola Company (NYSE:KO).

Today, the stock went up further and hit its highest level to $110.50 per share over the past 52-week range. Green Mountain Coffee Roasters, Inc (NYSE:GMCR) is up more than 27% at the time of this writing, around 10:15 in the morning in New York.

The two companies entered a 10-year partnership agreement  to develop and introduce the global brand portfolio of The Coca-Cola Company (NYSE:KO) that will be used in the upcoming Keurig Cold at-home beverage system.

Coca-Cola buys 10% minority equity position in GMCR

The Coca-Cola Company (NYSE:KO) purchased 10% minority stake or 16, 684,139 newly shares of Green Mountain Coffee Roasters, Inc (NYSE:GMCR) worth $1.25 billion. The global beverage company bought its stake in the coffee company for $74.98 a share, which represents the volume weighted average price (VWAP) of the stock’s trailing 50-trading-day after the market closed on Wednesday.

Brian P. Kelley, president and CEO of Green Mountain Coffee Roasters, Inc (NYSE:GMCR) said, the partnership offers a significant opportunity to accelerate the company’s growth in the cold beverage category.

“This global relationship combines The Coca-Cola Company’s (NYSE:KO) unparalleled brand, distribution and marketing strengths with GMCR’s innovative technology and beverage system expertise,” added Kelley.

Exclusive partner

Green Mountain Coffee Roasters, Inc (NYSE:GMCR) will become the exclusive partner of The Coca-Cola Company (NYSE:KO) to produce and sell the Coca-Cola branded single-serve, pod-based cold beverages. Both companies will work together in exploring other  future opportunities under the Keureg platform and in the bringing Keurig Cold beverage system to consumers worldwide.

On the other hand, Muhtar Kent, chairman and CEO of  The Coca-Cola Company (NYSE:KO) said. “This agreement demonstrates our creative approach to partnerships and ability to identify and stay at the forefront of consumer trends driving the industry.”

Green Mountain Coffee Roasters, Inc (NYSE:GMCR) plans to use the proceeds to buyback shares under its existing $1.1 billion share repurchase authorization to reduce the dilution from the equity transaction. The transaction is expected to close in March 2014.

Game Changer

CNBC’s Jim Cramer commented that the deal is a “game changer for Green Mountain.” According to him, “People felt that hot [coffee] had peaked. Suddenly you have cold and you have unlimited firepower and you have international distribution.”

Meanwhile, Investment risk monitoring firm, Smartstops.net showed that  Green Mountain Coffee Roasters, Inc (NYSE:GMCR) has  normal risk level both in aggressive and conservative risk state.

GMCR smartstops

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