German Investor to Buy Douwe Egberts
AMSTERDAM -- Nestlé and Mondelez International Inc. will face competition from a "hot drinks empire" once German investor Joh A Benckiser (JAB) buys Douwe Egberts coffee for $9.8 billion, according to a report by Reuters.
The Dutch owner of Douwe Egberts coffee and Pickwick Tea, D.E. Master Blenders 1753 (DEMB), announced Friday it had reached a conditional agreement on a $16.34-per-share, cash takeover from a team of investors led by JAB, which has been building a hot drinks business that focuses on growth driven by new products, such as the single-serve coffee brewer.
"JAB and its partners intend to use DEMB as their platform for both organic growth, as well as acquisitions in the fast-moving consumer goods coffee and tea categories," stated JAB Chairman Bart Becht, who will become chairman of the Dutch company.
The offer is lower than JAB's original proposal of $16.66 per share, but still represents a 36-percent premium to D.E. Master Blenders' average closing share price in the three months ended March 27, when the initial proposal was disclosed, reported the news outlet.
"We consider the probability of a higher offer to be slim," KBC Securities Analysts Pascale Weber and Jan-Willem Billiet said in a note that recommended investors to accept the offer. They also stated that JAB already owns about 15 percent of D.E. Master Blenders, meaning it will actually pay about $8.38 billion.
While DEMB did not say why the offer price had been reduced from the initial proposal, the company is expected to have a strong position in Europe.
DEMB CEO Jan Bennick will step down after the takeover.
Owned by the billionaire Reimann family, JAB's brands in the United States include Caribou Coffee Co. Inc. and Peet's Coffee & Tea Inc.
As CSNews Online recently reported, Caribou Coffee decided to close 80 underperforming stores and convert another 88 stores to Peet's Coffee & Tea sites -- a decision which set off a firestorm of angry comments on social media websites. Caribou said it is making the changes to better position the coffee company for long-term growth, according to a report by The Associated Press.
Meanwhile, DEMB, which also owns Senseo coffee, has experienced difficulties of its own since it was spun off last year from Sara Lee Corp. Fraud, tax and inventory problems plagued the company's Brazilian unit, shocking investors and forcing it to restate past financial statements, according to various media reports.
In addition, former CEO Michael Herkemij resigned in December, just six months after its stock market debut. In February, the firm reported lower profits than it had anticipated and cut its earnings outlook for 2013.