A German billionaire family has been on a breakfast buying binge. The newest item on its plate: doughnuts.
The board of Krispy Kreme, best known for its warm glazed doughnuts, agreed to the company’s acquisition by JAB Holding Co and a minority investor, BDT Capital Partners, for US$1.35 billion, it announced on Monday.
JAB is the investment arm of the Reimann family, the heirs to the German consumer goods conglomerate Joh. A. Benckiser.
Its subsidiary, JAB Beech, plans to add the company’s doughnuts to its other quick-serve US breakfast staples, including several coffee chains and a bagel company.
In recent years, JAB has acquired brand names such as the parent company of Einstein Brothers Bagels, Peet’s Coffee & Tea, Stumptown Coffee Roasters and Caribou Coffee. In December last year, JAB acquired Keurig Green Mountain for US$13.9 billion, its biggest bet yet in building its coffee empire.
Krispy Kreme, founded almost 80 years ago, is most famous for its glazed doughnut, but it also sells a wide assortment of other flavors, such as lemon-filled and sour cream. More recently, the company has made coffee a priority with new offerings and promotions.
Coffee also happens to be the key ingredient in JAB’s other recent acquisitions.
JAB’s portfolio makes it the “near-ideal candidate” to control Krispy Kreme, Stephens analyst Will Slabaugh said in a research note on Monday.
JAB would be able to improve Krispy Kreme’s operations, add food and beverage options, and help it expand nationally and internationally, Slabaugh said.
“We are thrilled to have such an iconic brand as Krispy Kreme joining the JAB portfolio,” Peter Harf, senior partner at JAB, said in the statement.
“This is yet another example of our commitment to investing in extraordinary brands with significant growth prospects,” Harf said.
Breakfast has become more lucrative for fast-food restaurants in recent years. All-day breakfast at McDonald’s contributed to a 35 percent increase in its first quarter profit. Other chains, such as Wendy’s and Taco Bell, have also focused more intently on the first meal of the day.
The attention created more competition for customers in the morning hours, a time when Krispy Kreme already had fierce competition from Starbucks, Dunkin’ Donuts and Tim Horton’s.
JAB plans to acquire Krispy Kreme for US$21 a share in cash, a premium of more than 25 percent from the closing price on Friday last week.
Krispy Kreme has almost no debt. Its shares jumped in Monday trading to just shy of the buyout offer price.
BDT Capital Partners, the private equity firm led by Byron Trott, former vice chairman of investment banking at Goldman Sachs, is investing alongside JAB and is to hold a minority stake.
As part of the agreement, Krispy Kreme is to remain independently operated from its headquarters in Winston-Salem, North Carolina, and will no longer trade on the public markets. The transaction, which needs shareholder approval, is expected to close in the third quarter.
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