By Holly Griffin, Ishaanika Gulzar, Kai Lim, Katerina Georgiou, Tomiwa Oshai (King’s College London); Smit Kotak, Diana Usova, Hisha Tharmarajah, Martin Atkinson (University of Bristol)
Photo: Waldemar (Unsplash)
Overview of the deal
Acquirer: Keurig Dr Pepper (NASDAQ: KDP)Â Â
Target: GHOST (GHOST Lifestyle LLC and GHOST Beverages LLC)Â Â
Implied Equity Value: -Â
Total Transaction Size: $1.65 billion Â
Closed date: Expected to close late 2024 or early 2025 (60% stake)Â Â
Acquirer advisors: BofA Securities (financial); Cleary Gottlieb Steen & Hamilton LLP (legal)Â Â
Target advisors: Morgan Stanley & Co. LLC (financial); Winston & Strawn LLP (legal)Â
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On October 24, 2024, Keurig Dr Pepper (KDP), the beverage giant, announced that it has entered into a definitive agreement to acquire GHOST, an energy drink and sports nutrition company, experiencing rapid growth, for a total of $1.65 billion. Under the terms of the agreement, Keurig Dr Pepper (KDP) will initially acquire a 60% stake in GHOST for approximately $990 million, with plans to purchase the remaining 40% by 2028, based on GHOST's financial performance in 2027. Â
This strategic acquisition is key to KDP's efforts to diversify and expand its beverage portfolio by entering the fast-growing energy drink sector. GHOST, founded in 2016, has quickly become a popular brand known for its brand identity, innovative flavours, and strong market presence. Its sales have increased significantly, more than quadrupling over the last three years. Despite KDP's acquisition, GHOST's co-founders will continue to lead the brand, ensuring that its unique identity and innovative approach are maintained under KDP's broader umbrella. Â
By integrating GHOST into its existing portfolio KDP aims to leverage synergies and achieve economies of scale that will enhance its competitive advantage in the market. The deal also positions KDP to anticipate better competition by expanding its reach and capabilities in the energy drink market. Overall, this acquisition underlines KDP's strategic intent to enter and establish a leading position in the rapidly growing energy drink market, complementing its existing beverage portfolio and strengthening its competitive advantage in this sector.Â
"We could not be more excited to build the future of GHOST together with KDP. As we thought about our company’s next chapter, KDP’s track record of cultivating disruptive brands, similar challenger mindset, and shared vision for the energy category and beyond made it the right home for our brand and team. We are excited to pair KDP’s insights and capabilities with our products and people and know that together we will continue to scale and build GHOST towards our vision of a 100 year brand." - Dan Lourenco, GHOST CEO and Co-Founder
Company Details (Acquirer - Keurig Dr Pepper)
Founded in 2018, Keurig Dr Pepper (KDP) is a prominent beverage company in North America, with a diverse portfolio of 125 companies from carbonated soft drinks, juices, and coffee. KDP leverages its partnerships with Evian and Starbucks to expand its offerings, all driven by their purpose of Do Well. Do Good.
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Founded in 2018, headquartered in Frisco, Texas, USA
CEO:Â Tim Cofer
Number of Employees:Â 28,000+
Market Cap:Â $43.91bn (as of 22/12/2024)
LTM Revenue:Â $15.15bn
LTM EBITDA:Â $4.23bn
LTM EV/Revenue:Â 3.95x
LTM EV/EBITDA:Â 14.08x
Recent Transactions:Â Strategic Asset Acquisition of Kalil Bottling Co.
Company Details (Target - GHOST)
GHOST is a lifestyle sports nutrition brand, known for its innovative approach to product development and branding. The company operates primarily in the U.S. market, with a growing presence in international markets across over 40 countries. Their product range focuses on health-conscious consumers, offering sugar-free, nootropic-enhanced beverages that cater to both lifestyle and fitness segments.Â
Founded in 2016, headquartered in Chicago, Illinois, USA
CEO: Dan Lourenco
Number of employees: 247
Market Cap:Â -
EV: $1.65 billion
LTM Revenue:Â -
LTM EBITDA:Â -
LTM EV/Revenue:Â -
LTM EV/EBITDA: -
Projections and Assumptions
Short-Term Consequences
GHOST will continue to be led by co-founders, Dan Lourenco and Ryan Hughes, and will be integrated into KDP’s U.S. refreshment beverages segment, which made up nearly 60% of the company’s total sales in 2023. Under the terms of the agreement, KDP will initially purchase a 60% stake in GHOST, followed by the acquisition of the remaining 40% stake in 2028.
The transaction is set to substantially enhance KDP’s presence in the energy drink sector, expanding its reach into GHOST’s established consumer base. In recent years, energy drinks have garnered popularity as the younger population in the U.S. turns to fitness and lifestyle products. The acquisition will allow KDP to capitalise on the GHOST brand’s lifestyle appeal within a competitive market. This increase in consumer base will lead to short-term revenue growth and improve market positioning in the fast-growing energy drink space.
KDP expects to invest up to $250 million to integrate GHOST into its own direct store delivery network. The transition could create initial logistical challenges, such as supply chain adjustments and distributor realignments. Whilst this could create friction with existing GHOST distributors, KDP’s established network may streamline operations in the long run, ensuring supply chain security and greater market penetration.Â
Long-Term Upsides
Diversification: KDP will have access to the rapidly growing energy drink market, which is increasingly popular among younger consumers seeking alternatives to traditional sodas and sugary beverages. KDP’s energy portfolio will now include multiple, powerful brands spanning lifestyle, performance, and other major occasions in the category.
Earnings: GHOST's net sales have surged over fourfold in the past three years, while GHOST Energy has emerged as one of the energy category's fastest-growing brands. This growth is driven by its distinctive identity, unique flavours, eye-catching packaging, and strong consumer appeal. As a result, the acquisition is expected to enhance KPD's earnings structure.
Cost synergies: KDP's extensive distribution network has the potential to lower GHOST's operational expenses, enhancing economies of scale. By merging GHOST's production with KDP's current facilities or utilizing KDP's supplier partnerships, GHOST may gain access to reduced production and raw material costs.
Risks and Uncertainties
The acquisition of a stake in GHOST Energy by Keurig Dr Pepper presents a great opportunity but is not without risks and uncertainties. A key challenge lies in integrating GHOST into Keurig Dr Pepper's direct store delivery (DSD) network, a complex process requiring a $250 million investment to ensure a smooth transition. Any issues could disrupt supply chains, delay deliveries, and diminish the anticipated operational and financial synergies.
The competitive landscape of the industry adds further uncertainty, with established giants like Red Bull and Monster dominating the energy drink market. It remains to be seen whether GHOST can scale its niche appeal while preserving its distinct brand identity. Financial pressures also persist, as KDP’s stock dropped over 5% following the announcement, reflecting investor scepticism. Coupled with a third-quarter revenue miss, these factors raise concerns about the timing and scale of the acquisition.
Additionally, evolving regulations on caffeine and sugar could force costly changes to product formulations and marketing strategies. Meanwhile, shifting consumer preferences toward healthier beverages may limit GHOST’s growth potential. The success of this acquisition will ultimately rely on Keurig Dr Pepper's ability to combat these integrations and market, financial, regulatory, and consumer challenges.
ESG considerations
Environment:
Carbon Footprint: GHOST’s production and distribution through Keuring Doctor Pepper’s (KDP) Direct Store Delivery (DSD) network could increase emissions unless managed sustainably.Â
Resource Use: GHOST's supplements and energy drinks likely rely on various raw materials, some of which might pose supply chain sustainability challenges.
Sustainability:
Health and Wellness Trends: Energy drinks often face scrutiny for high sugar content and associated health risks. It’s important to address consumer concerns with greater transparency.Â
Governance:
Ethical Marketing Practises: Energy drinks are often marketed to younger audiences, raising potential ethical concerns. KDP should ensure that GHOST’s marketing complies with standards to avoid targeting vulnerable populations irresponsibly.