How Starboard could build value at Keurig Dr Pepper ahead of its JDE Peet deal

Company Overview - Keurig Dr Pepper is a North American beverage company that manufactures, markets, distributes, and sells hot and cold beverages and single-serve brewing systems [1] - The company has a diverse portfolio of brands including Keurig, Dr Pepper, Canada Dry, Mott's, A&W, and Snapple, among others [1] - The U.S. refreshment beverages segment accounts for 63.9% of revenue, while the U.S. coffee segment contributes 22.77%, and the international segment makes up 13.33% [4] Recent Developments - Starboard Value has taken a position in Keurig Dr Pepper and has engaged in discussions with the company's management [3] - Following a merger between Dr Pepper Snapple Group and Keurig Green Mountain in January 2018, JAB Holdings became the majority owner, reducing Dr Pepper shareholders to a minority stake of 13% [5] - Recent changes in JAB's ownership dynamics have led to calls for a reseparation of beverage and coffee assets, which management has responded to by announcing a merger with JDE Peet's [6][7] Market Reaction - The announcement of the merger with JDE Peet's resulted in a 25% decline in KDP shares, indicating investor shock and concern over the transaction structure [7] - The merger was structured as an all-cash acquisition with a large premium, financed by an $18.5 billion loan, leading to a projected leverage-to-earnings ratio exceeding 5x by 2026 [9] Activist Investor Strategy - Starboard's involvement is seen as a strategic move to influence the company during a critical transition, despite the cash deal leaving KDP shareholders without a vote [10] - Starboard has a history of successful engagements with consumer and retail companies, and its approach at KDP may involve seeking board representation and restoring investor confidence [11][13] - The recent decline in KDP's share price presents an opportunity for Starboard to invest at a discount, similar to its previous engagement with Ritchie Bros Auctioneer [14]