D.E Master Blenders 1753 NV (DE), the coffee and tea company spun off by Sara Lee Corp., said it’s in talks to be acquired by a group led by Joh. A. Benckiser in a bid that values the company at 7.6 billion euros ($9.7 billion).
JAB, the investment firm run by Bart Becht, plans to pay 12.75 euros a share, Amsterdam-based Master Blenders said today, a 33 percent premium to yesterday’s closing price. The proposal is subject to an examination of the company’s finances and talks are “in an early stage,” the maker of Douwe Egberts said.
Master Blenders gained as much as 31 percent in Amsterdam trading, the most since it was spun off from Sara Lee in June. JAB raised its stake in the company to 15.05 percent in October.
Buying Master Blenders would add to JAB’s coffee investments, which it bolstered in the past year by purchasing Peet’s Coffee & Tea Inc. for about $1 billion and Caribou Coffee Co. for $340 million. A takeover would pit the Benckiser family against Nestle SA, (NESN) the Swiss maker of Nespresso, the biggest single-service brand in the $45 billion global coffee business.
“There’s a lot of potential in Master Blenders,” said Richard Withagen, an analyst at SNS Securities in Amsterdam. “JAB think they can get a good return on the price.”
The offer values Master Blenders at a multiple of 29 times earnings, according to Pierre Tegner, an analyst at Natixis in Paris. That’s less than the 40 times earnings that JAB paid for Emeryville, California-based Peet’s and the 42 times it offered in December for Minneapolis-based Caribou.
Becht is assembling a coffee empire after JAB subsidiary Coty Inc. unsuccessfully attempted a takeover last year of door- to-door cosmetics seller Avon Products Inc. (AVP) for more than $10 billion. Becht, also chairman of Coty, said then that the perfume maker would pursue other opportunities.
Master Blenders makes L’OR capsules that are compatible with Nespresso machines, while its Senseo system competes with Nestle’s Nescafe Dolce Gusto portioned coffee brand, which is nearing annual sales of 1 billion Swiss francs. Nespresso’s sales exceeded 3.5 billion Swiss francs ($3.7 billion) in 2011.
Master Blenders shares were up 26 percent at 12.15 euros at 2:15 p.m., valuing the company at about 7.2 billion euros.
Since being spun off from Sara Lee, Master Blenders has restated earnings because of accounting irregularities in Brazil and reported sales that missed estimates. Chief Executive Officer Michiel Herkemij left at the end of last year because of a difference of opinion, leaving Chairman Jan Bennink in charge.
The company dealt a fresh blow to investors last month by reducing its 2013 sales and profitability forecasts amid increasing pressure on prices in Europe.
Master Blenders has revamped its Senseo system with new packaging and flavors and has said it plans to expand into new regions. The company has introduced a new machine called Sarista that uses whole beans and is aimed at coffee aficionados.
Companies in the Netherlands have become increasingly attractive as takeover targets as they struggle to compete against larger international rivals and offer bidders a foothold into continental Europe.
Liberty Global today agreed to buy a 12.7 percent stake in Dutch cable company Ziggo NV for 633 million euros as it builds a pan-European franchise. CSM NV, (CSM) a Dutch maker of bakery ingredients, on March 25 agreed to sell its bakery supplies unit for $1.4 billion, while billionaire Carlos Slim’s America Movil SAB snapped up 28 percent of Royal KPN NV for about $3.4 billion last year. United Parcel Service Inc.’s $7 billion offer for TNT Express NV was later thwarted by antitrust objections.
JAB may further reduce its stake in Reckitt Benckiser Group Plc (RB/) to help fund the purchase of Master Blenders, said Tegner of Natixis. The Luxembourg-based investment firm raised about 1.2 billion pounds ($1.8 billion) in May by selling a 4.9 percent holding in the maker of Lysol cleaners. It still owns 10.5 percent, worth about 3.6 billion pounds. Becht said in January that JAB has no plan to cut its stake any further.
Tom Johnson, a spokesman for JAB, said today that he couldn’t comment beyond Master Blenders’ statement.
Reckitt Benckiser fell as much as 3.1 percent in London trading and was down 1.1 percent at 4,725 pence at 1:15 p.m.
Lazard Ltd., Goldman Sachs Group Inc. and JPMorgan Chase & Co. are acting for Master Blenders, with Allen & Overy LLP giving legal advice, spokesman Michiel Quarles van Ufford said.
AB InBev Speculation
Today’s announcement from the Dutch coffee company came after the Daily Mail reported that Anheuser-Busch InBev NV, (ABI) the world’s biggest brewer, sounded out two of Master Blenders’ biggest shareholders about the possibility of acquiring their stakes prior to making a full offer at 12.50 euros a share. The newspaper cited traders that it didn’t identify. AB InBev never comments on market speculation, spokeswoman Karen Couck said by e-mail. Van Ufford said he was unable to comment on the report.
Olivier Goudet and Peter Harf, who run JAB along with Becht, once served together on the board of directors of AB InBev. The trio collectively own 8 percent of JAB.
In addition to JAB, other main shareholders in Master Blenders include Morgan Stanley, FMR LLC and DB Platinum Advisors, according to data compiled by Bloomberg.
“At this time, I can’t see anyone realistically coming with a superior offer,” SNS’s Withagen said.
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