Krispy Kreme will be acquired by JAB Holding in $1.35-billion deal
The company that bought Caribou Coffee and Keurig is now working to acquire Krispy Kreme. The doughnut chain will go private once the deal is finalized.
Krispy Kreme is getting a new owner.
The coffee-and-doughnut chain, most famous for its hot glazed doughnuts, announced Monday that it will be acquired by a subsidiary of JAB Holding Company for $1.35 billion, or $21 per share. Krispy Kreme will be privately owned and remain independently operated once the merger is finalized.
“JAB’s experience and industry knowledge make them the ideal partner to help grow the iconic Krispy Kreme brand throughout the world,” Krispy Kreme CEO Tony Thompson said in a press release. “We remain focused on our long term strategy and continuing to offer our premium, high-quality doughnuts and sweet treats to consumers around the world.”
JAB Holding Company manages the wealth of the Reimann family in Germany, whose net worth totals at least $20 billion. The company has a particular interest in the coffee business, with controlling shares in Peet’s Coffee & Tea, Caribou Coffee, and others. In December 2015, JAB bought Keurig Green Mountain, one of the largest makers of home-brew coffee products, for $13.9 billion.
The home-brew coffee business is extremely profitable. The packaged coffee business was worth approximately $80 billion in 2015 alone, expanding by 5 percent annually. Worldwide coffee production is expected to climb by 1.4 percent this year to accommodate growing demand.
Mergers allow JAB to expand its reach in that market, especially in the United States, against big rivals like Nestle. Keurig, for example, controls 61 percent of the North American single-serve coffee market. Nestle leads the global coffee market, but only holds 4 percent of the market in North America.
The Krispy Kreme merger with JAB will not only let JAB broaden its portfolio, it could also enable the doughnut company to survive. Krispy Kreme does well in international markets, but its sales in the United States have been on the decline for the past few years. In September 2015, quarterly sales and earnings were down by 12 percent; sales for the year were down more than 20 percent.
In a statement, JAB Senior Partner Peter Harf said, “We are thrilled to have such an iconic brand as Krispy Kreme joining the JAB portfolio. We feel strongly that Krispy Kreme will benefit greatly from our long-term focus and support for management’s vision in building on the legacy of this exciting brand as an independent standalone entity.”
But despite soft domestic sales, Krispy Kreme continues to open stores both at home and abroad. Following a decade outside New England, the doughnut chain announced in February that it intends to open seven stores in Dunkin’ Donuts’ backyard in the northeast United States within the next few years.
Krispy Kreme’s emphasis on doughnuts first, coffee second have made it more difficult for the chain to compete against larger rivals like Dunkin’ Donuts and Starbucks, which offer more variety. That doesn’t mean Krispy Kreme hasn’t tried thinking outside the doughnut mold. In the past, the chain has offered one-day promotional sales events and coffee blends to go with its doughnuts.
More recently, things have started looking up for the company: In early March, Krispy Kreme reported fourth-quarter earnings for fiscal year 2016. Revenue increased by 5.8 percent from the previous year, and net income rose from $30.1 million to $32.4 million.