The company used a portion of these proceeds to reduce its total debt obligations to $2.55 billion, in-line with its target capital structure of approximately 2.25 times total debt to EBITDA after certain adjustments.
“Having achieved our capital structure target less than two years after going public, and with a focus on growing the business organically, we are now committed to returning excess cash to shareholders over time,” said Larry Young, DPS president and CEO. “We’re excited to be working with PepsiCo and are confident in our continuing ability to generate strong cash flows.”
Under the new licensing agreements, PepsiCo will distribute Dr Pepper, Crush and Schweppes in the U.S. territories where these brands were formerly distributed by PBG and PAS. The same will apply for Dr Pepper, Crush, Schweppes, Vernors and Sussex in Canada, and Squirt and Canada Dry in Mexico. The new agreements will have an initial term of 20 years, with 20-year renewal periods, and will require PepsiCo to meet certain performance conditions.
Additionally, in U.S. territories where it has a manufacturing and distribution footprint, DPS will shortly begin selling certain owned and licensed brands, including Sunkist soda, Squirt, Vernors and Hawaiian Punch, that were previously distributed by PBG and PAS.
The one-time cash payment of $900 million will be recorded as deferred revenue and recognized as net sales over the estimated 25 year life of the customer relationship.