Mondelez International says it intends to combine its coffee portfolio with D.E Master Blenders 1753 B.V.’s coffee business to a pure-play coffee company.
Upon closing, Mondelez International will receive after-tax cash proceeds of approximately US$5 billion and 49% interest in the new company.
The company also announced plans to reduce operating costs to levels through a restructuring program that is expected to deliver cost savings of at least $1.5 billion by 2018, providing additional opportunity for margin expansion beyond its revised 2016 target of 15-16%.
The new company, to be called Jacobs Douwe Egberts, will hold leading positions in more than two dozen countries and have a strong emerging markets presence in the US$81 billion global coffee category.
With greater focus and increased scale, it will be able to operate more efficiently and invest more effectively in innovation, manufacturing and market development to capitalize on the significant growth opportunities in coffee.
Jacobs Douwe Egberts is expected to have total revenue of more than $7 billion.
In 2013, Mondelez International’s coffee business generated approximately $3.9 billion in revenue.
Mondelez International expects the transactions to be completed in the course of 2015, subject to limited closing conditions, including regulatory approvals.
The company expects the transactions to be accretive to earnings in the first full year following close.
