Big News for KKD Stock
The German owner of Keurig coffee wants to take doughnut chain Krispy Kreme Doughnuts (NYSE:KKD) stock private in a deal worth $1.35 billion.
On Monday, JAB Holding Co. will pay $21.00 for each share of KKD stock. That’s about a 25% premium to the Winston-Salem, North Carolina-based company’s Friday closing price of $16.86. (Source: “Krispy Kreme to be Acquired by JAB Beech for $21 Per Share in Cash,” Krispy Kreme Doughnuts Investor Relations, May 9, 2016.)
Krispy Kreme’s board unanimously approved the transaction, which is targeted to close in the third quarter. Once the deal is finalized, JAB will own more than 1,100 shops in over 26 countries.
“This transaction puts us in the best possible position to continue to spread that joy to a growing number of people around the world while delivering significant value to Krispy Kreme shareholders,” Krispy Kreme Chairman Jim Morgan said in a statement. (Source: Ibid.)
For JAB, the deal represents its latest attempt to build one of the largest pure-play coffee companies in the world. Last year, the holding company spent $13.9 billion to buy the home-brewing company Keurig Green Mountain Inc. JAB also owns interest in coffee chains like Caribou Coffee, Jacobs Douwe Egberts, and Peet’s Coffee & Tea. (Source: “The company that bought Keurig is buying Krispy Kreme,” Business Insider, May 9, 2016.)
How exactly JAB will turn a profit on this deal is yet to be seen. Officially, JAB says Krispy Kreme’s management team will continue to operate independently from its current headquarters. The holding company, though, likely has bigger plans given the premium price it paid for this acquisition.
Coffee is a small part of Krispy Kreme’s sales mix. Today, nearly all of the company’s revenue comes from doughnuts. The biggest opportunity to life sales short-term would be to put some of JAB’s world-class coffee brands into Krispy Kreme stores.
Regardless, Krispy Kreme fans can expect some changes at their favorite doughnut shop. But given the dynamics of the coffee industry, where JAB has been putting most of its investment dollars to work as of late, analysts suspect more big deals could follow.