The Dr Pepper and Seven-Up holding companies have agreed in principle to merge in a $1.3 billion transaction, and Prudential-Bache Interfunding Inc. will be a major shareholder, officials said.
The new company will be called Dr Pepper-Seven-Up Cos. Inc. and will be the third-largest soft drink franchise enterprise in the nation, behind Coca-Cola and Pepsico.The merged company will pay shareholders of the old Dr Pepper and Seven-Up a total of $500 million in cash and $100 million in debt and preferred stock, the companies said. Exactly how much will go to each companies' shareholders has not been determined, spokesman Tom Bayer said Wednesday.
Existing shareholders and senior management will own 51 percent of the merged operation, while Prudential-Bache Interfunding the merchant banking arm of investment firm Prudential-Bache Securities Inc. and other investors will own the remaining 49 percent.
Prudential-Bache's role in the new company was not foreseen by management of Seven-Up and Dr Pepper when the companies announced the initial merger agreement March 1, Bayer said.
Prudential-Bache approached the holding companies set up after March 1 and proposed to buy into the merged operation.
"This is all new," Bayer said.
Financing for the transaction includes about $75 million of additional bank borrowings by Dr Pepper and approximately $125 million by Seven-Up, arranged with Bankers Trust Co.
The transaction is expected to be completed within 60 days, company officials said. No new management changes are expected, said John R. Albers, chief executive officer of both Dr Pepper and Seven-Up.