A billionaire European family is on a caffeine-fueled binge to roll up the global coffee industry, with a huge bet announced on Monday: A US$13.9 billion acquisition of Keurig Green Mountain.
The all-cash deal, coming in at a 78 percent premium, was a surprise to analysts and investors. Keurig has had its share of challenges, facing a saturated market for its single-serving coffee brewers, declining sales of pods and a stalled product launch.
However, JAB Holding Co — the investment arm of the Reimann family, heirs to German consumer goods company Joh. A. Benckiser GmbH — is in year three of its quest to dominate the global coffee industry. Keurig, which commands a large majority of the single-serving market in the US, was a natural next step for the Reimanns.
Photo: AP
JAB is to lead an investor group to acquire Keurig for US$92 per share in cash, according to a statement released on Monday. The deal joins JAB’s collection of others, including a controlling stake in Jacobs Douwe Egberts, a coffee conglomerate that owns international brands such as Bach Espresso and Bravo. It also has a controlling stake in Peet’s Coffee & Tea, which bought Stumptown Coffee Roasters this year, as well as Caribou Coffee Co, Espresso House and Baresso Coffee AS.
“Keurig Green Mountain represents a major step forward in the creation of our global coffee platform,” JAB chairman Bart Becht said in the statement. “Keurig Green Mountain will operate as an independent entity to ensure it will further build on its coffee and technology strength and continue to serve all its partners to the best of its abilities.”
The deal is a boon to the Keurig’s largest shareholder, Coca-Cola, which owns about a 17 percent stake.
“The Coca-Cola Co is fully supportive of this transaction,” Coca-Cola chief executive officer Muhtar Kent said in a statement. “We look forward to working with JAB, an experienced operator with a successful track record of investing in and growing consumer companies.”
Before the announcement, Keurig shares had been down more than 61 percent on the year.
Investors had soured on Keurig after the company reported declining sales growth and a disappointing outlook for next year. It invested more than US$100 million on a Kold machine to make soda, which is off to a slower start than expected.
Those weaknesses might be fixed by JAB, given its know-how in the coffee world and ability to turn the business around out of the public eye, Wedbush analyst Phil Terpolilli said.
JAB said in the news release that Keurig would continue operating as an independent company, with its headquarters in Waterbury, Vermont.
JAB is acquiring Keurig along with several firms that are already investors in Jacobs Douwe Egberts. The other investors include Mondelez International and BDT Capital Partners.
The transaction is expected to close during the first quarter of next year.
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