On the Margin
Krispy Kreme

Is Krispy Kreme’s owner eyeing Dunkin’ Brands?

Blog: Amid rumors JAB could buy Dunkin, analyst says price would be steep

This post is part of the On the Margin blog.

JAB Holding Co. sure loves coffee and doughnuts.

The conglomerate, owned by a German family whose wealth dates back to the 1800s, has been on a buying binge in recent years, acquiring companies that sell coffee, doughnuts and bagels. 

JAB Holding’s acquisitions have included Caribou Coffee, Peet’s Coffee & Tea, Krispy Kreme Doughnuts Inc., Einstein Noah Restaurant Group Inc., Stumptown Coffee Roasters and Intelligentsia Coffee. Oh, and it also bought Keurig Green Mountain, the maker of single-serve coffee pods. 

Could Dunkin’ Brands Group Inc. be next? That’s uncertain, but there are rumors that JAB Holding could buy the parent to Dunkin’ Donuts and Baskin-Robbins and add them to its growing collection of coffee and treat purveyors. 

But such a deal would not be cheap. Andrew Strelzik, analyst with BMO Capital Markets, suggests that JAB Holding would have to pay about $65 to $75 per share, or more than $9.1 billion, to acquire Dunkin’ Brands. A $75-per-share price would be a 35-percent premium over the company’s closing price Friday. More importantly, it would be substantially higher than any price for which Dunkin’ Brands stock has sold.

Strelzik based his price speculation on the premiums JAB Holding paid for previous acquisitions. JAB Holding paid a 26-percent premium for Krispy Kreme and a 37-percent premium for Einstein Noah — an average premium of 32 percent.

Dunkin’ Brands has an enterprise value of $7.26 billion, so investors would get another $1.7 billion in addition to that, should they decide to sell to JAB Holding.

That certainly isn’t too steep of a price for JAB Holding, which has paid much more than that for other brands ($13 billion for Keurig, for instance). And Dunkin’ Brands has plenty of upside, with a fully franchised model and plenty of white space in its home market of the U.S. Dunkin’ Brands would also add a huge name to the company’s holdings, and would certainly bolster the Keurig brand.

Investing in coffee makes sense for JAB Holding. Consumers drink a lot of it, often multiple times per day, and the habitual nature of coffee purchases makes the business recession-proof to an extent. 

That said, JAB Holding’s foothold in coffee is already substantial. The company is working on strategies to bolster Caribou Coffee’s sales, for instance, by pairing its shops with Einstein Bros. Bagels. 

Plus, it has all sorts of coffee upside if it can get Krispy Kreme customers to buy the stuff.

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

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