Summary
Mondelēz International, Inc. (MDLZ) announced the completion of significant transactions involving its global coffee business on July 2, 2015. The company combined its wholly-owned coffee operations with D.E Master Blenders 1753 B.V. (DEMB) to form a new entity named Jacobs Douwe Egberts (JDE), in which Mondelēz now holds a 43.5% equity interest. This strategic move generated substantial cash proceeds and a significant ownership stake, effectively transforming Mondelēz into a more focused global snacks company. While the coffee business represented a considerable portion of past revenues, the company's future revenue will be primarily derived from its snacks portfolio, including biscuits, chocolate, gum, and candy. Mondelēz will report its equity earnings from JDE separately, after tax, and apply the equity method of accounting. To aid investor understanding and facilitate comparisons, the company will also present non-GAAP financial measures that exclude the historical coffee business results and other equity method investments from organic net revenue and adjusted operating income, while maintaining historical adjusted EPS reporting.
Key Highlights
- 1Completion of global coffee business combination with D.E Master Blenders 1753 B.V. to form Jacobs Douwe Egberts (JDE) on July 2, 2015.
- 2Mondelēz International received €3.8 billion ($4.2 billion USD) in cash and a 43.5% equity interest in the new JDE entity.
- 3The company also received a $275 million receivable related to tax formation costs, payable one year after closing.
- 4Post-transaction, Mondelēz will be primarily focused on its snacks business, with snacks accounting for approximately 85% of 2014 net revenues (excluding coffee).
- 5Mondelēz will account for its 43.5% stake in JDE using the equity method, reporting earnings after tax, separate from operating income.
- 6The company will provide non-GAAP financial information to facilitate comparisons, excluding historical coffee business and other equity method investments from Organic Net Revenue and Adjusted Operating Income.
- 7Preliminary valuation of the JDE investment is expected in Q3 2015, with finalization of sale proceeds and adjustments anticipated by the end of Q2 2016.