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June 7, 2018

JAB Holding Company’s Long-term Love Affair with the American Consumer

MHT Partners  | Consumer Investment Bank

One name has dominated the headlines over the last few years in global food, beverage, and casual dining M&A:  JAB Holding Company.  It seems like every month a billion dollar deal is announced involving JAB, including the May 29th Pret a Manger acquisition for a reported £1.5 billion.  Outside financial circles, however, few people know much about JAB.  Is it a private equity firm?  Family office?  What is its source of capital, and why all of the sudden does JAB seem like the largest coffee company in the world?

First off, a bit of history on JAB Holdings Company.  JAB is short for Johann A. Benckiser, who founded German industrial chemical company Benckiser in 1823.  Benckiser’s cofounder, Austrian Albert Reimann, married into the Benckiser family (Johann’s daughter), and the Reimann family controlled Benckiser until its merger with Reckitt in 1999.  JAB was subsequently formed as an investment vehicle and is currently controlled by four Reimann family members.  JAB is not a sleepy family office, as the entity invests like a multi-billion dollar PE fund, including the use of debt and coinvestors.  While there are several layers of family ownership and publicly traded bonds, JAB’s website currently lists only six “investments” managed by a relatively lean team.  However, the portfolio is deceiving as four of the investments are majority-owned holding companies representing tens of billions of dollars’ worth of acquisitions over a relatively short period of time.  In 2017, per the publicly disclosed accounts of JAB Holding Company S.a.r.l (a Luxembourg entity), JAB’s assets were valued at €22.7 billion[1], including minority positions in publicly traded Reckitt Benckiser and Coty Inc.

Drilling down on U.S. investments, JAB owns a controlling interest in Keurig Green Mountain, which JAB took private with Mondelez in 2016 in a $14.4 billion transaction.  If that wasn’t enough caffeine for JAB (the world’s second largest coffee company[2]), the Keurig ownership group (Acorn Holdings) announced in January it will acquire Dr. Pepper Snapple for $18.7 billion (JAB is contributing $9.0 billion of equity).  JAB also controls JAB Beech Inc., which has spent over $10 billion since 2013 building a coffee, donut, bagel, and fast casual restaurant empire that now rivals the likes of Starbucks, Burger King, and McDonalds.  Consider some additional U.S. deals and their announced valuations:

2012:  Peet’s Coffee & Tea:  $1.0 billion (followed by Stumptown, Intelligentsia, Mighty Leaf, and others)

2014:  Einstein Noah Restaurant Group:  $485 million (preceded by Caribou Coffee, followed by Bruegger’s Bagels)

2016:  Krispy Kreme Doughnuts:  $1.3 billion

2017:  Panera Bread Company:  $7.8 billion (followed by Au Bon Pain)

Not to be ignored are JAB’s investments in over a dozen leading European coffee (and soon restaurant) brands as well as its minority interest in European fashion brand Bally.

What is next for JAB in the U.S.?  More coffee?  Alcohol brands?  More restaurant chains?  JAB’s partners have not publicly disclosed any plans, but as long-term investors, they are clearly not scared off by today’s asset valuations and have the deal chops to take large, publicly traded companies private.

[1] JAB S.a.r.l. consolidated financials Dec 2017

[2] Source:  Bloomberg


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