Investors to Reap Windfall From Keurig Buyout

A group led by Luxembourg's JAB will pay a premium of 78% for the coffee-machine maker, which has seen its stock price fall 61% over the past year.
Katie Kuehner-HebertDecember 7, 2015
Investors to Reap Windfall From Keurig Buyout

Keurig Green Mountain said Monday it had agreed to be taken private by an investor group that will pay a substantial premium for the struggling coffee-machine maker.

The deal values Keurig at $13.9 billion, or $92 a share, representing a 78% premium to the company’s closing price on Friday. The stock was trading Monday at $89.17, up more than 72%.

The buyers are led by Luxembourg-based JAB, an investment firm that manages the $16 billion fortune of Germany’s Reimann family and owns controlling stakes in Peet’s Coffee & Tea, Caribou Coffee, Espresso House, and Baresso Coffee.

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“Keurig Green Mountain represents a major step forward in the creation of our global coffee platform,” JAB Chairman Bart Becht said in a news release.

As Bloomberg reports, the buyout is a “windfall” for investors who have watched Keurig’s stock drop 61% over the past year. When compared with the stock’s 20-day average, the premium to investors is 89%  the largest in beverage-industry history for any acquisition above $5 billion.

But Bloomberg noted that the deal’s valuation is only about 12 times the trailing year of earnings before interest, taxes, depreciation and amortization.

“I was surprised by an acquisition,” said Brian Holland, an analyst at Consumer Edge Research. “Selling now implies that maybe there were more mounting headwinds.”

Through the year ended Sept. 26, Keurig’s sales fell 4% to $4.52 billion, while its profits tumbled 16% to $498 million.

“Keurig has suffered from waning sales of its K-Cup containers and lower prices on brewers. And a new cold brewer is rolling out more slowly than expected,” Bloomberg said.

Minority investors in the JAB group include Mondelez International and affiliates of BDT Capital Partners.  “Keurig Green Mountain will operate as an independent entity to ensure it will further build on its coffee and technology strength,” Becht said.

Susquehanna International analyst Pablo Zuanic said JAB’s goal is to be the “Budweiser of coffee.”

“JAB knows what they are doing and this is obviously part of a much, much bigger strategy,” he said on a conference call. “Just like you’ve seen Anheuser-Busch InBev consolidate beer, they want to consolidate coffee.”