Dunkin Brands shares surged to a record high on Tuesday amid speculation that Coca-Cola or one of its rivals could look to acquire the booming coffee brand.
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Coca-Cola paid $5.1 billion last month to acquire British coffeehouse chain Costa, in a move that placed the beverage giant in direct with Starbucks and other coffee industry leaders. If that acquisition, Coke’s largest ever, proves to be a success, Dunkin would make a natural takeover target for the company whose brands include Dansai bottled water and Honest Tea, according to a note from Gordon Haskett analyst Don Bilson.
“Assuming this move goes well, we see one beneficiary being Dunkin Brands (DNKN) which has long been thought of as a target for [JAB Holdings] and now profiles as a prospect for KO as well,” Bilson wrote. “Of course, DNKN is breaking in a new CEO at the moment and we assumed back in July when this move was finalized that DNKN was planning on remaining independent, at least for a while. We aren't in any rush to amend that thought but KO's purchase does up the ante in the coffee wars and as we see it, DNKN is now a strategic asset that JAB and KO both may want.”
JAB Holdings owns 87% of Keurig Dr. Pepper, the combined entity that arose when Keurig Green Mountain acquired the Dr. Pepper Snapple Group for more than $18 billion last July. The German conglomerate, based in Luxembourg, has long been rumored to have interest in Dunkin Brands.
“We do not comment on rumor or speculation,” a Dunkin Brands spokesperson told FOX Business.
Dunkin shares rose over 4% on the takeover speculation.
Coca-Cola’s acquisition of Costa included all of the brands roughly 3,800 stores, the majority of which are located in the United Kingdom, according to the Wall Street Journal.
Dunkin Brands had a market cap in excess of $6 billion as of Tuesday, much smaller than rival Starbucks, whose market cap is $72 billion.