Deals

Brooke Sutherland is a Bloomberg Gadfly columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.

The numbers are in for a Panera Bread Co. deal and, as expected, it's not cheap.  

The bakery-cafe chain announced on Wednesday that it's selling itself to JAB Holding Co. for about $7.5 billion including debt, or $315 a share. The purchase price works out to about 19 times the restaurant company's Ebitda in the past year and almost 3 times its revenue. Such multiples are enough to put it in the upper echelon of North American restaurant deals of the last decade.

Check, Please
Panera Bread ranks among the more expensive North American restaurant targets in the past decade
Source: Bloomberg
Excludes deals smaller than $100 million.

JAB is no stranger to big, pricey deals. Its last purchase, the $1.4 billion takeover of Krispy Kreme Doughnuts Inc. in 2016, involved similar valuations to those commanded by Panera. Meanwhile, JAB paid more than 20 times Ebitda for Peet's Coffee & Tea Inc. in 2012, and then forked over a  78 percent premium for the $14 billion takeover of Keurig Green Mountain Inc. in 2016.

One Way to Get There
JAB's bid values Panera at a valuation it hasn't seen in more than a decade
Source: Bloomberg

Such a rapid flurry of activity in such a short time would raise questions about any company's financial situation. JAB is uniquely situated to pay up for deals, though. On the one hand, it's a private investor with a long-term holding mentality. But its food and coffee roll-up strategy has also given it the kind of portfolio that creates synergy opportunities usually only available to strategic buyers.

Panera Appeal
The chain's growth has slowed, but it is still growing and not just as a result of new stores. The company also has a meaningful digital business that could be valuable to JAB.
Source: Bloomberg

There might be some kind of savings to be had by combining Panera's dough facilities and orders for pastry-making supplies with Krispy Kreme's doughnut-making operations, for example. Some of JAB's coffee brands could also be sold at Panera stores, while Panera's digital success could be applied across JAB's empire.

Among the speculated buyers for Panera -- Starbucks Corp. reportedly was the first to approach the company about a deal, while Domino's Pizza Inc. had also been considered a potential bidder -- JAB makes the most sense. It has experience melding different brands while maintaining distinct locations, something Starbucks has struggled with. You can never rule out a bidding war, although it seems unlikely that Starbucks would want to top an already rich price for a deal that would have taken it out of its comfort zone.

This bread looks fully baked.  

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Brooke Sutherland in New York at bsutherland7@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net