April 11 (Bloomberg) -- Joh. A. Benckiser is close to announcing a formal offer to buy D.E Master Blenders 1753 NV, the coffee and tea company spun off by Sara Lee Corp., in a bid that may value the company at 7.6 billion euros ($10 billion), people familiar with the matter said.
JAB, the investment firm run by Bart Becht, plans to pay about 12.75 euros a share, said the people, who declined to be identified because the matter is confidential. The agreement will be announced within a week, the people said.
The investment arm of the German billionaire Reimann family has secured financing from Citigroup Inc., Bank of America Corp., Rabobank Groep and Morgan Stanley, according to the people. The two parties said last month that they were in talks that could lead to a deal, causing a 25 percent gain in Master Blenders share price on March 28.
“They arranged financing quite quickly,” said Robert Jan Vos, an analyst at ABM Amro. “The market now assumes that there is close to 100 percent chance that the bid will be successful. I still think it’s a knockout bid.”
BDT Capital Partners LLC, the Chicago-based investment firm run by former Goldman Sachs Group Inc. vice chairman Byron Trott, has been in talks with JAB about participating in the takeover offer, a person familiar with the matter said. While Trott could advise or help line up financing for the deal, a decision hasn’t been made, the person said.
Trott, who has relationships with Warren Buffett, the Pritzker family and the S.C. Johnson family, last year worked with JAB on its buyout of Peet’s Coffee, taking a minority stake. He and his investment firm also advised Coty Inc., majority owned by JAB, in its failed effort to acquire Avon Products Inc. for more than $10 billion last year. Trott didn’t return calls seeking comment.
D.E Master Blenders shares rose as much as 3.1 percent on the news, and closed 0.9 percent higher at 12.23 euros in Amsterdam.
Master Blenders spokesman Michiel Quarles van Ufford declined to comment, saying that he was not in a position to comment on JAB’s plans. Spokesmen at Bank of America and Morgan Stanley declined to comment, as did officials at JAB and Rabobank. A representative for Citigroup couldn’t be immediately reached for comment.
Buying Master Blenders will 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, the Swiss maker of Nespresso, the biggest single-service brand in the $45 billion global coffee business.
The offer valued Master Blenders at a multiple of 29 times earnings, Pierre Tegner, an analyst at Natixis in Paris, estimated last month. 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 Coty’s unsuccessful attempt to take over door-to-door cosmetics seller Avon. 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. Its Senseo system competes with Nestle’s Nescafe Dolce Gusto portioned coffee brand.
Since being spun off from Sara Lee, Master Blenders has restated earnings because of accounting irregularities in Brazil and has 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.
Credit default swaps on Master Blenders surged as much as 6 percent today, and rose 1.5 percent to 169 basis points as of 5:45 p.m. in London, according to data compiled by Bloomberg. CDS contracts typically rise as investor confidence deteriorates and fall as it improves. The swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt.
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