On the Margin
Panera

Ranking Panera Bread’s potential suitors

Blog: Reports suggest Panera Bread is for sale, so let’s look at who could be a buyer

This post is part of the On the Margin blog.

On Monday, Bloomberg reported that Panera Bread Co. might put itself up for sale after receiving interest from a potential buyer. The news sent the company’s stock price skyrocketing

If Panera is taking that step, it means the offer being thrown about was strong enough to make such a deal tempting. That means there’s someone out there willing to pay more than $7 billion for the fast-casual chain — a lot more than $7 billion, in fact.

As I wrote about several weeks ago now, 2017 is going to be a huge year for mergers and acquisitions — in part because there are buyers out there willing to pay high prices for restaurant companies. Almost like clockwork, Restaurant Brands International Inc. went out and paid a 20-plus multiple for Popeyes Louisiana Kitchen Inc.

Not surprisingly, news of the Panera sale rumors has led to considerable speculation about who could buy the company. Here’s my own take on potential suitors — in order of most likely to make a deal.

JAB Holding. The Luxembourg-based investment firm has been on a breakfast binge in recent years. It has acquired Krispy Kreme Doughnuts Inc., Caribou Coffee, Einstein Bros. Bagels, Peet’s Coffee and even Keurig Green Mountain. It has paid much more than $7 billion for some of its acquisitions.

There’s a lot of rumor and speculation — some of it published here — that JAB was targeting Dunkin’ Brands Inc., which has an enterprise value only slightly higher than Panera. It’s not out of the realm of reason to think that maybe JAB grew tired of negotiations with Dunkin’ and turned its eyes to Panera. And Panera certainly fits with the strategy JAB is undertaking with its acquisitions.

Oh, and JAB is willing to pay high multiples to get what it wants.

Restaurant Brands International. To be honest, anybody after JAB seems something of a stretch, for various reasons. RBI is one such example. Panera would make a lot of sense for the Canadian owner of Burger King, Tim Hortons and now Popeyes. 

It is a fast-casual chain. It has few locations in international markets and would thus benefit from 3G’s aggressive growth strategy. Panera still has a lot of company locations that could be sold to franchisees. And like JAB RBI is willing to pay big multiples for what it wants.

But, RBI just got done buying Popeyes. Another deal this fast would seem quick, but that is an aggressive company.

Yum! Brands Inc. Now that Yum has unloaded itself of its Chinese operations, it wouldn’t be entirely out of line to think that the Louisville-based quick-service operator could look at making a purchase.

Panera is a strong candidate for Yum for many of the same reasons as it is for RBI, and Panera would give Yum a bigger slice of the domestic breakfast market. 

Panera would also help Yum with technology integration, something it wants for its Pizza Hut brand. True, Yum hasn’t made an acquisition in the U.S. in nearly two decades, but all things must come to an end. 

Starbucks Coffee Inc. A lot of the Panera acquisition rumors on Monday concentrated on Starbucks.

The Seattle-based coffee giant certainly isn’t immune from making acquisitions. It has made several purchases over the years, in fact.

Starbucks has long wanted to expand its food offerings and Panera would certainly help with that, which could offset the coffee brand’s slowing growth. And Panera with Starbucks Coffee would certainly be a powerhouse combination.

Yet Panera isn’t quite as easy a fit as, say, Teavana was when Starbucks bought the brand in 2012. Indeed, Starbucks has seemed more intent over the years on buying brands that could enhance its coffee shops. Panera seems more like a competitor. 

A mystery buyer. It’s possible that some strategic buyer not on this list could emerge to take a run at Panera Bread. It’s also possible that another investment firm could see potential in the St. Louis-based company. There is a lot to like about the chain. 

To be sure, the price for Panera is likely too high for most potential buyers. A buyer would almost certainly have to pay north of 18 times cash flow for Panera, which would price out most private-equity groups. And relatively few strategic buyers seem willing to swallow a company of Panera’s size.

Still, this is also a different era in the restaurant buying business. Investors see potential that goes far beyond the traditional cash flow multiple, as both JAB and RBI have demonstrated. Given Panera Bread’s strength, and its international growth potential, any number of buyers could step in and make a run at the chain if they have the wherewithal, and about $8 billion.

Jonathan Maze, Nation’s Restaurant News senior financial editor, does not directly own stock or interest in a restaurant company.

Contact Jonathan Maze at [email protected]

Follow him on Twitter: @jonathanmaze

Correction: April 4, 2017 A previous version of this post had the incorrect headquarters for JAB Holding C0.

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