Coca-Cola to Increase Green Mountain Stake to 16% -- 2nd Update

By Dow Jones Business News, 
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By Mike Esterl

Coca-Cola Co. said Tuesday that it would increase its stake in Keurig Green Mountain Inc. to 16% from 10% as the world's largest beverage company deepens its exposure to coffee and countertop carbonation.

The move comes after it signed an agreement in February to sell its cold drinks through an at-home beverage system being developed by the fast-growing maker of the Keurig single-serve coffee maker.

Under February's partnership, Coke also acquired a 10% stake in Keurig for $1.25 billion and the option to increase its stake up to 16% through open-market purchases of Keurig's common stock within 36 months.

In a statement Tuesday, Coke said it has entered an accelerated purchase agreement with Credit Suisse to acquire shares to reach that level.

"These incremental purchases demonstrate our continued belief that Keurig Green Mountain has substantial growth potential," Coke said Tuesday.

Keurig's share price rose 9% to $120.85 in early trading Tuesday. Based on Keurig's closing share price Monday of $ 110.71, Coke's additional 6% stake purchase would cost roughly $1.07 billion.

Keurig shares closed at $80.88 on Feb. 5, before Coke announced its initial 10% stake purchase.

Shares of Coke added 26 cents to $41.08 in early trading Tuesday.

Coke said in February it would make its global drink portfolio--which includes its namesake cola and hundreds of other brands including Sprite, Fanta, Minute Maid and Powerade--available around the world through Green Mountain's KeurigCold system. Green Mountain said at the time that the system should be available in fiscal 2015, which begins Sept. 28.

Atlanta-based Coke is moving beyond store aisles and restaurant fountain machines in a bid to find new consumers after its global soda sales slipped 1% in the first quarter, the first decline in its carbonated beverage business since 1999. Soda sales are struggling particularly in the U.S., where industry volumes have contracted nine straight years as increasingly health-conscious Americans worry about the effects of sweetened drinks.

Keurig and Coke hope to swipe market share from SodaStream International Ltd., the current market leader in countertop, soda-making machines globally and in the U.S. But home carbonation remains a niche market, with SodaStream only in about 1% of American households.

Other companies are also entering the category. Bevyz Global Ltd. plans to begin selling countertop carbonation machines in the U.S. this year under a distribution deal with Cuisinart. PepsiCo Inc., Coke's main beverage rival, has a minority stake in Bevyz but has yet to confirm if it will sell its drinks through the system.

Write to Mike Esterl at mike.esterl@wsj.com

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