Keurig Dr Pepper Inc

4. Acquisitions

GHOST TRANSACTIONS

On October 23, 2024, we entered into a definitive agreement with GHOST, and certain other parties named therein, to acquire a controlling interest in GHOST. Founded in 2016, GHOST is a lifestyle sports nutrition business with a portfolio anchored by GHOST Energy, a leading ready-to-drink energy brand.

Under the terms of the agreement, we initially purchased a 60% stake in GHOST for aggregate consideration of $999 million, which included customary adjustments. We also entered into an agreement which requires us to purchase the remaining equity interests in GHOST in 2028.

Separately from the above transaction, we also executed an agreement with GHOST and ABI which terminates the distribution rights for certain GHOST products by ABI, effective March 3, 2025, for a termination payment to ABI of $225 million. At that time, we will assume the distribution of such products. The termination payment was accrued as of December 31, 2024, with the corresponding expense included within Other operating expense (income), net in the Consolidated Statements of Income.

Under the acquisition method of accounting, total consideration was as follows:

(1)The fair value of our mandatory redemption liability is estimated using the Monte Carlo simulation method which includes forecasted EBITDA expectations, adjusting for market risks and volatility, calculating redemption prices, discounting to present terms with the cost of debt, and averaging results across scenarios to determine fair value, incorporating the market price of risk and volatility estimates from similar companies.

The initial payment of $999 million was funded primarily by proceeds drawn from the Term Loan Agreement. Refer to Note 3 for additional information.

Allocation of Consideration

Our preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in the GHOST Transactions is based on estimated fair values as of December 31, 2024. The following is a summary of the preliminary allocation of consideration to the estimated fair values of assets acquired and liabilities assumed in the GHOST Transactions as of December 31, 2024:

(1)Amount includes both the current and non-current portion of the holdback liability. Refer to Note 17 for additional information.

The GHOST Transactions preliminarily resulted in $437 million of goodwill. The goodwill to be recognized is attributable to revenue synergies, driven by a strong portfolio of brands with exposure to higher growth segments and the ability to leverage our collective distribution strength, as well as operational and general and administrative cost synergies. The goodwill created in the GHOST Transactions is expected to be deductible for tax purposes. All of the goodwill is included in our U.S. Refreshment Beverages segment.

We have not presented estimated unaudited pro forma results of operations for the GHOST Transactions or the actual results of GHOST because it is not material to our consolidated financial statements.

OTHER IMMATERIAL ACQUISITIONS

Kalil Acquisition

On May 30, 2024, we entered into an agreement with Kalil, under which we agreed to acquire all of Kalil’s production, sales, and distribution assets for total consideration of $103 million, subject to certain adjustments outlined in the agreement. Kalil is an independent bottler with bottling and distribution rights in Arizona to key KDP brands, including Canada Dry, 7UP, A&W, Snapple, and Core Hydration. On August 9, 2024, we completed the Kalil Acquisition, and approximately $8 million of cash was held back and placed in escrow.

Our preliminary allocation of consideration exchanged to the net tangible and intangible assets acquired and liabilities assumed in the Kalil Acquisition is based on estimated fair values as of August 9, 2024, and the consideration was primarily allocated to property, plant, and equipment and other intangible assets.

Other

We spent $6 million in connection with an immaterial acquisition during the year ended December 31, 2024.