Following Keurig Dr Pepper's (KDP) announcement on Monday of its acquisition of Dutch coffee group JDE Peet's, rating agency S&P Global has placed the company under negative credit watch.

In a report released Monday, S&P downgraded the popular carbonated beverage company's credit outlook, with analysts emphasizing that KDP's debt profile will deteriorate significantly after announcing the $18 billion acquisition of JDE Peet's.

Analysts noted that upon completion of the acquisition, KDP's leverage ratio (debt-to-EBITDA) could reach 5x or higher, substantially above the 4x leverage level recorded at the end of June.

KDP announced the JDE Peet's acquisition agreement early Monday morning, with the deal representing a 20% premium to JDE Peet's Friday closing price. The company plans to spin off the combined entity into two separate U.S. publicly traded companies - one focused on coffee operations and another concentrated on other beverage businesses.

S&P indicated it currently expects to formally downgrade KDP's credit rating by one notch to BBB- (the lowest tier of investment grade) when the transaction nears completion.

S&P analysts noted they anticipate the combined company will reduce leverage back below the 4x range approximately two years after transaction completion. S&P based this assessment on expectations that the company "will prioritize debt repayment, achieve profit growth, and realize synergies, leading to substantial improvement in credit metrics."