Krispy Kreme is hot now as $1.35 billion takeover target

Krispy Kreme is hot now as $1.35 billion takeover target
The Reimann family's JAB Holding Investment couldn't resist Krispy Kreme and is taking over the company in a $1.35 billion deal. (Krispy Kreme)

The Reimann family, one of Europe’s wealthiest business dynasties, has the coffee. Now, it wants the doughnuts.

The doughnuts it craves are Southern icon Krispy Kreme Doughnuts Inc., the global giant that started in 1937 in Winston-Salem, N.C.

After building a coffee empire ranging from Portland’s hipster Stumptown Coffee Roasters to single-serve mainstay Keurig, the Reimanns’ JAB Holding investment company wants its growing stable of consumer brands to add some high-calorie oomph with Krispy Kreme.

The $1.35 billion deal, announced Monday, puts the intensely private Reimann clan – Wolfgang, Stefan, Renate and Matthias – on a potential collision course with Krispy Kreme’s rival of the moment, the mighty Starbucks Corp.

It also trains a spotlight on JAB, whose stewardship of the Reimann fortune has drawn comparisons to 3G Capital, the Brazilian private equity giant run by the billionaire Jorge Paulo Lemann. JAB, run by a trio of trusted Reimann advisers, is coming off a four-year acquisition spree in which it spent about $30 billion taking controlling stakes in Jacobs Douwe Egberts, Peet’s Coffee & Tea, Caribou Coffee, Einstein Noah Restaurant Group, Espresso House and Baresso Coffee.

“They’ve been slowly amassing a pretty big umbrella of breakfast- and coffee-oriented brands, and so Krispy Kreme slides underneath that umbrella pretty easily,” said Will Slabaugh, an analyst at Stephens Inc.

Famous doughnuts

Krispy Kreme gained fame with its yeast-raised, glazed doughnuts, and only made a major move into java in recent years as its pastries fell out of favor. The chain introduced a new line of coffee blends in 2011, and it gradually added espresso-based drinks to the menu. That push – which also included promotions and redecorating some of its locations – brought it into more direct competition with Starbucks.

The increased competition from its smaller rival hadn’t made a dent in Starbucks business. The company’s sales climbed about 17 percent last year, helped by new food offerings and its expanding loyalty program.

That could change, though, with Krispy Kreme now having a wealthier backer with a cadre of high-end coffee brands at its disposal.

Krispy Kreme, known for its “hot now” sign alerting doughnut lovers when the glazing is fresh, has more than 1,000 locations in 25 countries. In Alabama, Krispy Kreme has more than a dozen stand-alone locations.

World-class coffee

“The biggest opportunity near-term would be to put some of their coffee brands they already own – which are world-class – into Krispy Kreme stores, and I think it would be a pretty nice sales lift immediately,” Slabaugh said.

JAB is buying Krispy Kreme through its JAB Beech subsidiary, which has Byron Trott’s BDT Capital Partners as a minority investor. After the transaction closes, Krispy Kreme will be privately owned.

Krispy Kreme shares rose 24 percent to $20.88 at 9:43 a.m. May 9 in New York, just under the $21-a-share offer price. The stock already had risen 12 percent this year through last week.

The deal is JAB’s second major coffee-related buyout announced in the past six months. The firm took single-serve coffee-maker Keurig Green Mountain Inc. private in a $13.9 billion deal that was announced in December and closed in March.

Reimann fortune

Alongside its coffee holdings, JAB has invested the Reimann fortune in a variety of consumer-goods companies such as fragrance-maker Coty Inc. and Durex condom-maker Reckitt Benckiser Group Plc.

The four Reimanns each have a net worth of $3.3 billion, according to the Bloomberg Billionaires Index. A fifth sibling, Andrea Reimann-Ciardelli, sold her stake in JAB in 2003 and has a $1.2 billion net worth.

For now, coffee is a small part of Krispy Kreme’s business. Almost 90 percent of its revenue came from doughnuts last year. Compare that with Dunkin’ Donuts, which gets most of its sales from coffee. Dunkin’, too, has been cited as a possible JAB takeover target, though the firm may take its time before making such a deal, Slabaugh said.

“They probably want to swallow an acquisition like this for a while before looking at something like Dunkin’,” he said.

Contact Orland at [email protected] and Kaplan at [email protected].

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