The investment firm for Austria’s billionaire Reimann family has agreed to buy Krispy Kreme Doughnuts for about US$1.35 billion, adding the doughnut chain to a coffee empire that already includes Keurig Green Mountain and Peet’s Coffee & Tea.
The firm, JAB, will pay Krispy Kreme investors $21 a share in cash, the North Carolina-based company said. That represents a 25 per cent premium over the stock’s closing price on Friday.
The deal brings a sweet edge to JAB’s sprawling coffee enterprise. The closely held JAB has spent more than $30bn in the past four years acquiring coffee companies in the United States and Europe to challenge the global leader Nestlé.
“They’ve been slowly amassing a pretty big umbrella of breakfast and coffee-oriented brands, and so Krispy Kreme slides underneath that umbrella pretty easily,” said Will Slabaugh, an analyst at Stephens.
Krispy Kreme gained fame with its yeast-raised, glazed doughnuts, and only made a major move into java in recent years as its pastries fell out of favour. The chain introduced a new line of coffee blends in 2011, and it gradually added espresso-based drinks to the menu too. That push – which also included promotions and redecorating some of its locations – brought it into more direct competition with Starbucks.
The increased competition from its smaller rival hadn’t made a dent in Starbucks business. The company’s sales climbed about 17 per cent last year, helped by new food offerings and its expanding loyalty programme.
That could change, though, with Krispy Kreme now having a wealthier backer with a cadre of high-end coffee brands at its disposal.
“The biggest opportunity near term would be to put some of their coffee brands they already own – which are world class – into Krispy Kreme stores, and I think it would be a pretty nice sales lift immediately,” Mr Slabaugh said.
JAB is buying Krispy Kreme through its JAB Beech subsidiary, which has BDT Capital Partners as a minority investor. After the transaction closes, Krispy Kreme will be privately owned.
Krispy Kreme shares rose 24 per cent to $20.85 in early trading in New York. The stock already had risen 12 per cent this year through last week.
The deal, which has no financing conditions, is expected to close in the third quarter.
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