Green Mountain Coffee Roasters Surges 30% as Coca-Cola Takes Stake

I know we all need coffee, but do we need it so badly that Green Mountain Coffee Roasters (GMCR) can increase its market capitalization by more than one-third after beating earnings and entering into a partnership with Coca-Cola (KO)?

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I guess we do–and so does Coca-Cola. Green Mountain said it earned 96 cents a share, beating forecasts for 90 cents, while revenue came in at $1.4 billion, in line with forecasts for $1.4 billion. Green Mountain also said that it would earn between 93 cents and 98 cents during its second quarter, below forecasts for $1.02, while full-year earnings would come in between $3.75 and $3.85, splitting the forecast for $3.83.

The big news, however, is Green Mountain’s partnership with Coca-Cola, which had Coca-Cola purchase a 10% stake in Green Mountain for $1.25 billion. From the press release:

The Coca-Cola Company (NYSE: KO) and Green Mountain Coffee Roasters, Inc. (GMCR) (NASDAQ: GMCR) announced today that the companies have signed a 10-year agreement to collaborate on the development and introduction of The Coca-Cola Company's global brand portfolio for use in GMCR's forthcoming Keurig Cold™ at-home beverage system. Under the global strategic agreement, GMCR and The Coca-Cola Company will cooperate to bring the Keurig Cold™ beverage system to consumers around the world. In an effort to align long-term interests, the companies also entered into a Common Stock Purchase Agreement whereby The Coca-Cola Company will purchase a 10% minority equity position in GMCR.

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Under the terms of the equity agreement, The Coca-Cola Company will acquire 16,684,139 newly issued shares in GMCR for approximately $1.25 billion, which represents an approximate 10% ownership in GMCR (after giving effect to the issuance). The newly issued shares have been priced at $74.98, which represents the trailing 50-trading-day volume weighted average price ("VWAP") as of market close today.

Shares of Green Mountain Coffee Roasters have gained 36% to $109.77 at 5:20 p.m., while shares of Coca-Cola have risen 0.8% to $37.92.