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The purchase price includes a tax benefit of about $400 million
on a net present value basis, said Dr Pepper Snapple, which
already has a roughly 3 percent stake in Bai.
Bai, which means "pure" in Mandarin Chinese, sweetens its drinks
with plant-based ingredients and infuses them with antioxidants
from coffee fruit and white tea.
Their drinks have no artificial sweeteners and only 5 calories
and 1 gram of sugar per serving.
The deal comes as several cities in the United States, including
Chicago and San Francisco voted for a new tax on sugary
beverages to address health issues linked to sugar consumption.
Dr Pepper Snapple bought a minority stake in Bai last year for
$15 million and is one of the company's "Allied Brands," which
are healthy-drinks companies that it distributes through its
network.
Princeton, New Jersey-based Bai is expected to generate about
$425 million in net sales in 2017, said Dr Pepper Snapple, which
also makes the 7UP and Schweppes soft drinks.
The company is expected to add $132 million to Dr Pepper
Snapple's sales in 2017, but reduce its earnings by about 3
cents per share due to higher marketing costs and increased
interest expenses related to financing the deal.
The deal is expected to close in the first quarter of 2017 and
add to the company's reported earnings in 2018, Dr Pepper
Snapple said.
Reuters reported in October that Dr Pepper Snapple was in talks
to acquire Bai Brands.
Credit Suisse Securities (USA) LLC is Dr Pepper Snapple's
exclusive financial adviser and Morgan, Lewis & Bockius its
legal adviser.
J.P. Morgan Securities LLC was Bai's exclusive financial adviser
and Skadden, Arps, Slate, Meagher & Flom LLP gave legal counsel.
(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Savio
D'Souza)
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