JAB Goes After Lunch Crowd With $7.2 Billion Panera Takeover

  • Investment firm pushes beyond coffee empire with deal
  • JAB had already scooped Krispy Kreme, Peet’s and Keurig

JAB to Acquire Panera in $7.5 Billion Deal

JAB Holding Co., the sprawling investment firm that owns Krispy Kreme and Keurig Green Mountain, agreed to buy Panera Bread Co. for about $7.2 billion, adding a bakery-cafe chain to a food empire that spans coffee, bagels and doughnuts.

The deal vaults JAB into the fast-casual restaurant market -- a category that touts fresher ingredients and includes the likes of Chipotle Mexican Grill Inc. and Shake Shack Inc. It also gives the firm access to lunch and dinner crowds, which its current roster of brands doesn’t reach as well.

For Americans, the transaction means one more household name will be under the banner of the little-known European holding company. JAB, an investment vehicle of Austria’s billionaire Reimann family, has already scooped up Caribou Coffee, the Einstein Noah Restaurant Group, Peet’s Coffee & Tea and Stumptown Coffee Roasters in a frenzied buying spree.

“No one’s ever gone about such an aggressive, far-reaching acquisition trail, with such a focus on the United States,” said Jeffrey Young, managing director of coffee consulting firm Allegra Strategies.

“They’ve very quickly become one of the three most influential companies in coffee,” he said, with JAB standing alongside Starbucks Corp. and Nestle SA. “One wonders what is next for them.”

The Panera purchase follows the game plan of JAB’s previous deals, where it grants control to a local management team. Panera Chief Executive Officer Ron Shaich, who founded the bakery chain and has become a well-known advocate for using natural ingredients, will continue to run the business after the acquisition.

Long-Term View

“We are pleased to join with JAB, a private investor with an equally long-term perspective, as well as a deep commitment to our strategic plan,” Shaich said in a statement.

Panera investors will receive $315 per share in cash, according to Wednesday’s statement. That’s 20 percent higher than the closing price on March 31, the last trading day before Bloomberg reported Panera was considering a sale.

JAB will take on $340 million in Panera debt, bringing the total deal to about $7.5 billion. It values Panera at 19 times earnings before interest, taxes, depreciation and amortization. That puts the transaction in the same range as JAB’s Krispy Kreme takeover, but it’s expensive by restaurant-industry standards. Comparable deals have fetched nine times Ebitda, according to data compiled by Bloomberg.

Panera rose as much as 14 percent to $312.98 in New York after the acquisition was announced. Shares of the St. Louis-based company were already up 34 percent this year, fueled partly by the deal speculation.

Starbucks Interest

Starbucks was the first suitor to express takeover interest in Panera, two people familiar with the situation have told Bloomberg. Starbucks is seeking ways to generate more money from food, and buying a bakery chain with more than 2,000 cafes across the U.S. and Canada would give it a massive presence in the category. But the coffee giant has shied away from blockbuster deals. Its biggest transaction so far was the purchase of Teavana for about $600 million.

It also bought the bakery chain La Boulange for about $100 million in 2012, but Starbucks shut that down in 2015. Starbucks still sells La Boulange-branded pastries in its cafes.

Panera, meanwhile, has about $5 billion in systemwide sales. It’s expanded steadily in recent years, growing from a single store in Boston to become one of the largest fast-casual competitors.

Selling Internally

Under JAB’s umbrella, Panera could begin serving the firm’s Peet’s, Caribou or Stumptown coffee brands. That opens up a “huge account to sell to internally,” Allegra’s Young said.

JAB’s acquisitions have been largely characterized by coffee and breakfast foods. It expanded its caffeine empire rapidly after an initial 2012 purchase of a stake in Amsterdam-based D.E Master Blenders 1753 NV, the maker of Senseo and Douwe Egberts brands. In the U.S., JAB has developed a portfolio of co-branded restaurants called Coffee & Bagels, offering Caribou java and Einstein Bros. bagels.

JAB also controls cosmetics maker Coty Inc., which this week announced an agreement to license Burberry Group Plc’s beauty brands.

Four Reimann siblings -- Renate Reimann-Haas, Matthias Reimann-Andersen, Stefan Reimann-Andersen and Wolfgang Reimann -- have a combined net worth of $11.6 billion, according to the Bloomberg Billionaires Index.

The Panera purchase is expected to close in the third quarter, subject to shareholder and regulatory approvals. Shaich and his affiliates have agreed to vote shares representing a 15.5 percent stake in favor of the agreement.

Panera consulted with Morgan Stanley and law firm Sullivan & Cromwell on the deal. JPMorgan Chase & Co. advised JAB with Skadden Arps Slate Meagher & Flom providing legal advice.

Sales Growth

Panera also provided preliminary first-quarter results on Wednesday, saying that comparable net bakery-cafe sales increased 5.3 percent from a year earlier. The company considers itself the best-performing restaurant stock over the past 20 years, with its shares gaining by more than 8,000 percent.

Panera relies less on franchisees than many chains: A little more than half its locations are in the hands of independent owners. At some fast-food businesses, franchisees account for more than 90 percent of restaurants -- and many investors have pushed for companies to increase those levels. But JAB CEO Olivier Goudet signaled that he would let Panera stay on its current course.

“We strongly support Panera’s vision for the future, strategic initiatives, culture of innovation, and balanced company versus franchise store mix,” he said.

— With assistance by Thomas Buckley

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE