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Dr Pepper Snapple Group forced to move fast for Bai Brands - analyst

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Dr Pepper Snapple Group had to move quickly to secure Bai Brands last year, according to an analyst, after the Bai-5 owner became the subject of a rival takeover bid.

Dr Pepper Snapple Group completed its purchase of Bai Brands earlier this year

Dr Pepper Snapple Group completed its purchase of Bai Brands earlier this year

Late last year, DPSG confirmed its intention to acquire control of Bai Brands for US$1.7bn. The purchase, which completed in January, came almost 18 months after DPSG bought a minority stake in the company.

DPSG had been Bai's US distributor since late-2013.

In a note to clients today, following a meeting with CEO Larry Young, Wells Fargo's MD of equity research for beverages, Bonnie Herzog, said the move to take full ownership of Bai had been "forced" on DPSG.

"A much higher, unsolicited offer from a competitor put the company 'in play' and forced DPSG's hand," Herzog wrote in the note. No specific detail was disclosed and no-one was immediately available for comment at DPSG when contacted by just-drinks today.

In February, DPSG initially forecast a 3% rise in incremental sales from the purchase of Bai, although this was lowered last month to a 2% increase. Herzog said in the note that the group did not have long enough between closing the deal and issuing guidance for full-year 2017 to "fully understand Bai's club channel sales and inventory". 

"Ultimately," Herzog concluded, "we think their decisive action to lower expectations and focus on driving trial over volume was the right one. We are generally confident in the brand's outlook and ability to positively contribute to DPS's growth."

Dr Pepper Snapple Group 2012-2016 - results data


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