JAB Holding Company goes after lunch crowd with Panera takeover

JAB HOLDING Co., the sprawling investment firm that owns Krispy Kreme and Keurig Green Mountain, agreed to buy Panera Bread Co. for about US$ 7.2 billion ( RM32.4 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 and Nestle. “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.

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

JAB will take on US$ 340 million in Panera debt, bringing the total deal to about US$ 7.5 billion. It values Panera at 19 times earnings before interest, taxes, depreciation and amortisation.

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 per cent to US$ 312.50 in New York after the acquisition was announced. Shares of the St. Louis-based company were already up 34 per cent this year, fuelled partly by the deal speculation.— WP-Bloomberg