Bai Brands LLC is exploring a sale that it hopes could value the privately held U.S. maker of antioxidant, five-calorie drinks at more than $2 billion including debt, people familiar with the situation said on Monday.
The sale process will test the possible interest of beverage companies including Coca-Cola Co (KO.N) and PepsiCo Inc (PEP.N) in buying upstart beverage brands, as the soft drinks industry grapples with increasingly health-conscious consumers.
Bai has hired investment bank JPMorgan Chase & Co (JPM.N) to run an auction and reach out to potential buyers, the sources said.
The sources asked not to be identified because the matter is confidential. Bai and JPMorgan declined to comment.
Bai, which means "pure" in Mandarin Chinese, sweetens its drinks with plant-based ingredients and infuses them with antioxidants from coffee fruit and white tea. It was founded in 2009 by entrepreneur Ben Weiss, who still owns a majority of the company.
The Princeton, New Jersey-based company has focused on expanding distribution and advertising, premiering its first Super Bowl commercial earlier this year.
Last year, drinks company Dr Pepper Snapple Group Inc (DPS.N) bought a minority stake in Bai, after signing an earlier distribution deal with the company. Like most major soda companies, Dr Pepper is known to make small investments as it seeks to spot the next brand to capture the attention of consumers.
For its part, Coca-Cola has invested in organic juice maker Suja, Honest Tea and Zico Coconut Water. In the case of Honest Tea and Zico, these investments eventually led to an outright acquisition. PepsiCo bought a 90 percent stake in tea drink SoBe in 1999 before buying the entire company a year later.
Still, it is not clear Dr. Pepper will follow in Coke's footsteps. In its conference call after releasing second-quarter 2015 results, Dr. Pepper's CFO, Marty Ellen, voiced wariness of an outright acquisition of Bai.
"To acquire them would be just too expensive, and we are not sure the right thing to do in terms of the amount of money it would actually take to own all these businesses," Ellen said.
One of the largest acquisitions of an upstart beverage brand was Coke's $4.1 billion purchase of Vitaminwater-maker Glaceau in 2007. Though lauded by analysts at the time as a way for Coke to expand its portfolio of health products, Coke last year agreed to change the wording on labels amid claims the drinks had overstated health benefits.
(Reporting by Lauren Hirsch in New York; Editing by Matthew Lewis)