JAB Buys U.S. Exposure in $1.35B Krispy Kreme Acquisition
JAB Beech, a holding company under the umbrella of German investment giant JAB Holdings Company, purchased the more than 1,100-location brand for $21 per share—$1.35 billion. JAB plans to close the deal in the third quarter, which would bring Krispy Kreme’s stock off the market and give the investor a big foothold in the U.S. market.
So why did JAB get into the donut market? For the parent of Caribou Coffee, Peet’s Coffee & Tea, Stumptown Coffee Roasters and Einstein Brothers, the food seems to be secondary to their ultimate goal to become the “Budweiser of coffee,” as analyst Pablo Zuanic at Susquehanna International said when the group bought Keurig.
Say what you will about that goal as far as quality, but the investor that also owns luxury brands Jimmy Choo, Bally and Belstaff isn’t likely to let quality slip.
There are some significant synergies in the acquisitions, especially for Keurig. Now, the coffee-pod manufacturer can stop paying the licensing fee to offer Krispy Kreme’s coffee. That sends margins to the full estimated 80 to 85 percent mark for pods in general. Expect to see more Krispy Kreme pods in grocery stores and marketing that emphasizes the quality of the coffee.
Krispy Kreme will benefit as well from the operational support and capital of JAB. Despite driving up beverage sales and ticket prices in recent years, the brand’s stock has sank 2.4 percent in the past year, and stock-shorting interest skyrocketed in recent months as investors expected poor results.
The acquisition also primes Krispy Kreme for expansion both in the U.S. and abroad. But JAB will likely focus on the U.S. market first. Like Jollibee’s recent Smashburger deal that saw the $100 million equity buyout of a 40 percent stake in the company, this is a way to get into the U.S. market in a big way. Jollibee is still on the search for more exposure in the U.S. market, with hopes to grab a $1 billion U.S. food company. As Tim Horton’s has recently learned, if you have the money, it’s just easier to buy a brand that already resonates than it is to attempt an international expansion.
As for the chatter about JAB buying up all the coffee bands like Dunkin’ Donuts, that’s unlikely. JAB might be able to come up with the money, but it now has the massive U.S. retail footprint it was searching for. Expect them to expand that before another big buy.