Leading Dutch coffee supplier D.E. Master Blenders is to merge the coffee arm of US food giant Mondelez into a new group to fight for market share in the booming capsule sector, the two firms announced on Wednesday.
The deal will see the Dutch blender's best known coffee brand Douwe Egberts team up with Mondelez's Jacobs and Carte Noir to take on other giants in the market like Nestle.
Under the deal, Master Blenders, owned by a German investment group, will pay $5.0 billion (3.5 billion euros) in cash.
Mondelez, which reported a profit plunge on Wednesday, will also end up with 49.0 percent of the new player, which they said would be a world leader.
This new player in the coffee sector will be called Jacobs Douwe Egberts (JDE) and will be based in the Netherlands.
This strategy will "create the world's leading pure... coffee company," the two groups said in a joint statement.
Mondelez is a leader in the snack sector, and also owns coffee brands such as Gevalia and Tassimo.
The new company "will hold leading market positions in more than two dozen countries and will have a strong emerging market presence, giving it significant revenue synergy opportunities," the statement said.
The new entity would have annual sales of more than $7 billion (5 billion euros), the companies forecast.
Amsterdam-based D.E Master Blenders owns several global coffee and tea brands including Douwe Egberts, Senseo and Pickwick and traces its origins back to 1753.
D.E Master Blenders was taken over by a German investment group led by Joh. A. Benckiser, which bought it from Sara Lee in 2012 for nearly $10 billion (7.2 billion euros).
Mondelez, headquartered in Deerfield Illinois, last year garnered revenue of $35 billion (25 billion euros). Apart from its coffee business -- which counts for 17.0 percent of its total turnover -- it owns other top brands such as Cadbury, Oreo and Nabisco.
Mondelez is a Standard Poor's 500 and NASDAQ 100 company.
It posted a 70-percent plunge in net profit for the first quarter on Tuesday owing to lower coffee sales and weaker emerging markets.
Mondelez said its organic growth outlook for 2014 had slowed to 3.0 percent.
The latest deal form part of a $3.5 billion (2.5 billion euros) restructuring plan announced Wednesday, which Mondelez said would run through to 2018.
- Challenging emerging markets -
"We anticipate that the challenging environment in emerging markets will continue," it warned.
JDE will compete with beverage giant Nestle in the highly profitable coffee capsule market, sector analyst Tom Muller told AFP.
"The coffee capsule market, especially in the United States and Europe is a strong growth area," said Muller, a food and beverage market specialist at Amsterdam's Theodoor Gilissen private bank.
"In order to be a world leader and compete against a coffee capsule market leader like Nestle, you need coffee volumes and marketing power. This I think is the idea behind this deal," he said.
Muller estimated that the deal could mean that JDE would "become the world's top coffee producer in the combined capsule and coffee bean market".
The deal is expected to be completed in the course of 2015, subject to conditions including regulatory approvals.
Mondelez' chief executive Irene Rosenfeld said her company would "continue to benefit in the future growth of the coffee category."
Master Blenders chief executive Pierre Laubies said that the new entity JDE would "offer more people around the world more access to high-quality coffee" and would enable the company to seize significant growth opportunities in a highly-significant market.