GERMAN investor Joh A Benckiser (JAB) is to buy the owner of Douwe Egberts coffee in a €7.5 billion (£6.4bn) cash deal to create a global hot drinks empire aimed at taking on market leaders Nestle and Mondelez.
DE Master Blenders 1753 (DEMB), the Dutch group that also owns the Senseo range of coffee “pods”, said it had reached conditional agreement on a €12.50 a share takeover offer from a group of investors led by JAB. JAB, the investment vehicle of the billionaire Reimann family, has been building a hot drinks business in a bid to tap strong growth driven by new products and demand from emerging markets.
Its brands include Caribou Coffee and Peet’s Coffee & Tea in the US, while DEMB will give it a strong position in Europe.
The offer is below JAB’s original proposal of €12.75 per share, but still represents a 36 per cent premium to DEMB’s average closing share price in the three months to 27 March, when the initial proposal was disclosed.
Analysts said the price compared favourably with recent similar deals and saw little chance of a rival bid, not least because JAB already owns around 15 per cent of the Dutch group, meaning it will actually pay about €6.4bn.
KBC Securities analysts Pascale Weber and Jan-Willem Billiet, who recommended that investors accept the offer, said: “We consider the probability of a higher offer to be slim.”
DEMB declined to specify why the offer price had been reduced from the initial proposal and chief executive Jan Bennink, who will step down after the takeover, said it no other potential buyers had made contact.
JAB chairman Bart Becht – a former chief executive of Nurofen and Windolene parent company Reckitt Benckiser – will become chairman of DEMB. He said: “JAB and its partners intend to use DEMB as their platform for organic growth and acquisitions in the fast-moving consumer goods coffee and tea categories.”
The Reimann fortune comes from the Benckiser chemicals firm, founded in 1823. The family also controls fashion group Coty, and owns Labelux Group, manager of luxury brands Bally, Belstaff and Jimmy Choo.
DEMB has had a rocky time since it was spun off last year from US food group Sara Lee, which has since changed its name to Hillshire Brands.
Within weeks of its listing, it shocked investors with the news that its Brazilian unit had been hit by fraud, tax and inventory problems, forcing it to restate past financial statements.
Previous chief executive Michael Herkemij quit in December, six months after the stock market debut, and in February the firm reported lower-than-expected profits and cut its outlook for 2013, citing pricing pressures in austerity-hit Europe.
Swiss food and drink giant Nestlé sold $17.1bn (£11.1bn) of coffee last year, while Kenco owner Mondelez – formerly Kraft – ranked second at $8.3bn, according to Euromonitor International. DEMB ranks third with annual sales of about €2.7bn.
JAB said it would finance the deal through about €3bn of debt and €4.9bn in equity.