DPS Completes Bai Acquisition

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Dr Pepper Snapple Group Inc. (DPS) has announced the completion of its $1.7 billion purchase of Bai Brands LLC, sealing the deal on the largest brand acquisition in the non-alcoholic beverage industry since The Coca-Cola Company bought Glaceau, the maker of vitaminwater, for $4.2 billion in 2007.

The acquisition of Bai, which markets a range of low-calorie, antioxidant-infused beverages, was first announced in November 2016 and includes a tax benefit of approximately $400 million on a net present value basis.

“The Bai team has fostered a passionate, winning culture while hitting the bull’s-eye in meeting consumers’ needs for better-for-you beverages,” said Larry Young, DPS president and CEO, in a press release. “Now that they’re part of the DPS family, we’re going to let them continue to fly and build on the entrepreneurial spirit that’s driven their success while providing them access to the full complement of Dr Pepper Snapple’s resources and capabilities.”

As part of the agreement, Bai, established in 2009, will retain its headquarters in Hamilton, NJ and continue to be led by the brand’s founder and CEO Ben Weiss. The company will operate within DPS’s Packaged Beverages division.

DPS expects Bai to double its sales in 2017, projecting about $425 million in net sales this year, as well as adding an incremental $132 million to its existing overall net sales expectation.

The parent company also plans to invest an additional $25 million into Bai’s marketing budget this year, making it the second highest brand spend in the DPS portfolio for 2017.

The purchase solidifies the long-standing relationship between Bai and Plano, Tex.-based DPS, which began distributing Bai through its Allied Brands portfolio in 2013 and purchased a 3 percent minority stake in the company for $15 million in 2015.

The acquisition marks another example of large beverage companies shifting focus away from sugary drinks and towards better-for-you beverage options. Around the same time DPS announced its intention to purchase Bai, PepsiCo acquired sparkling probiotic beverage company KeVita for an undisclosed sum, having held a minority investment stake in the brand since 2013.

In an investor call at the time of the sale, Young said the acquisition “solidifies [DPS’s] position in the enhanced water category with the fastest-growing premium brand.” The DPS portfolio also includes brands such as 7UP, Hawaiian Punch, Mott’s, Schweppes and Sunkist soda.

During an interview with BevNET in November, Marty Ellen, CFO of DPS, explained that the valuation of Bai was based on strong future sales projections and distribution opportunities, fueled in part by product line extensions like Bubbles, Super Tea, Cocofusion and Black.

Despite making comments suggesting that Bai had “outgrown” the DPS system in the month leading to the sale announcement, Weiss told BevNET during an interview in November that he and CFO Ari Soroken turned down interest from at least six other potential buyers to stay with DPS.

Actor and singer Justin Timberlake, who joined Bai as an investor and Chief Flavor Officer in November, will be featured in a new television advertisement for the brand that is scheduled to appear during the Super Bowl LI broadcast this Sunday.