BURLINGTON, Mass., FRISCO, Texas, and AUSTIN, Texas — Keurig Dr Pepper Inc. and Nutrabolt on Thursday announced a strategic partnership, including a definitive agreement for a long-term sales and distribution arrangement and a significant equity investment.
The investment is expected to close by year-end.
Nutrabolt is a rapidly growing health and wellness company with a portfolio of brands, including C4 Energy, one of the fastest-growing performance energy drink brands in the U.S.; C4 Pre-Workout, the leading pre-workout brand globally; and XTEND, the no. 1 post-workout recovery brand in the U.S.
Under the long-term sales and distribution agreement, KDP will sell and distribute C4 Energy in the vast majority of KDP's company-owned direct store distribution territories. Nutrabolt will continue to distribute C4 Energy directly or through its existing distribution network to the specialty, health club and fitness channels and will continue to work with some of its existing beverage distributors in certain markets.
KDP will make a cash investment in Nutrabolt of $863 million, or approximately $740 million net of anticipated cash tax benefits, in exchange for preferred equity with a 5% annual coupon paid in cash or in-kind. The investment provides KDP with an ownership stake of approximately 30%, making KDP the largest investor in Nutrabolt behind its founder, chairman and CEO, Doss Cunningham. Net of the anticipated cash tax benefits, the investment represents a multiple below 4x estimated 2023 net sales, which are expected to be above $650 million. KDP also has the opportunity to earn additional equity tied to in-market execution and will have representation on the Nutrabolt board. In addition, the partnership provides KDP with rights to further increase its ownership stake under various capital raising scenarios.
"This partnership represents a win-win transaction between our two companies. KDP gains significant presence in the rapidly growing performance energy drink market and Nutrabolt gains access to a strategic investor with extensive sales and distribution capabilities to further accelerate its growth," said KDP Chairman and CEO Bob Gamgort. "We believe that bringing together the resources, talent and expertise of both companies will accelerate innovation and growth and drive significant value creation over time."
"We are extremely proud of this business and the team members who built it from the ground up and, with the assets and experience that KDP brings to the table, we are more confident than ever about the direction of the company and our vision for the future," Cunningham said. "This strategic partnership will supercharge C4 Energy's current growth trajectory by accelerating household penetration, enhancing distribution and strengthening our overall commercial capabilities. We will also be partnering with a talented and ambitious leadership team who shares our values, our competitive spirit and has a similar philosophy of disciplined growth and maximizing overall value creation."
"Over the past 20 years, Nutrabolt has grown from a bootstrap startup to become one of the fastest growing global active health and wellness companies in the world," Cunningham continued. "This is an amazing moment for our company, and it is because of the incredible contributions of our team members, commercial partners and those who have financially backed us over the years, namely MidOcean Partners, and CPG veterans and equity investors Brian Goldberg and Clayton Christopher."
The transition of C4 Energy distribution to KDP will occur during 2023, which is expected to be a transition and investment year, with limited impact on KDP financial results until 2024, when KDP expects the strategic partnership to become accretive to its financial results.