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.
Mondelez shares soared 7.7 per cent to $US37.94 ($A41.05) on the Nasdaq in early-afternoon trade.
Under the deal, Master Blenders, owned by a German investment group, will pay $US5.0 billion in cash.
Mondelez, which reported a profit plunge on Wednesday, will also end up with 49.0 per cent 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.
In a joint statement, the two groups say the strategy will "create the world's leading pure... coffee company".
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 $US7 billion, 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 $US10 billion.
Mondelez, headquartered in Deerfield, Illinois, last year garnered revenue of $US35 billion.
Apart from its coffee business, which counts for 17 per cent 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-per cent plunge in net profit for the first quarter on Wednesday owing to lower coffee sales and weaker emerging markets.
Mondelez said its organic growth outlook for 2014 had slowed to 3.0 per cent.
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