Coca-Cola to buy 10% of Green Mountain in $1.25 billion deal

Coca-Cola to buy 10% minority stake in Green Mountain Coffee

Coca-Cola Co. announced on Wednesday that it will purchase a 10 percent minority stake in Green Mountain Coffee Roasters.

Green Mountain shares surged as much as 55 percent in after-hours trading.

The companies have signed a 10-year agreement to collaborate on the development and introduction of Coca-Cola's global brand portfolio for use in Green Mountain's forthcoming Keurig Cold at-home beverage system.

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"Together we will be able to capitalize on the many exciting growth opportunities in the single-serve, pod-based segment of the cold beverage industry," Coca-Cola CEO Muhtar Kent said.

Under the agreement, Coca-Cola will acquire 16.68 million newly issued shares in GMCR for approximately $1.25 billion, or about 10 percent of Green Mountain.

Sodastream shares dropped 10 percent following the announcement.

—By CNBC's Karma Allen. Follow him on Twitter @iam_karma.