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JAB Aims to Rule the Global Coffee Market

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JAB Holding to take Keurig private

On December 7, 2015, Keurig Green Mountain (GMCR) entered into a definitive agreement under which JAB Holding will acquire Keurig. According to Reuters, the purchase price of $92 per share valued Keurig at 15x EBITDA (earnings before interest, tax, depreciation, and amortization).

This is not the first time that JAB has entered into a coffee deal. JAB is trying to build a powerhouse in the global coffee market to compete with the world’s leading coffee company, Nestle (NSRGY). According to Bloomberg, since 2012, JAB Holding has spent more than $30 billion in acquiring coffee companies in the US and Europe.

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Deal valuations

  • In July 2012, JAB disclosed a stake of 12.2% in DE Master Blenders 1753. JAB bought the whole company in October 2013 for $10.4 billion, valuing DE Master Blenders at 36x EBITDA.
  • In 2012, JAB Holding bought Peet’s Coffee for $973.9 million for a premium of 29% on Peet’s closing price of $57.16 on July 20, 2012. According to Bloomberg, the price represented 22x EBITDA. In the same year, JAB also bought US-based coffee chain Caribou Coffee.
  • In 2014, JAB bought the coffee unit of Mondelez International (MDLZ) for $5 billion. Mondelez and DE Master Blenders 1753 recently entered into a JV (joint venture), which combines the coffee businesses of both companies. The JV under the new company called Jacobs Douwe Egberts began operations in 3Q15.
  • In 2014, JAB also acquired the parent company of Einstein Bros. Bagels, a bagel and coffee chain in the US, for $374 million. As per Einstein Bros., the purchase price of $20.25 per share represented a 47% premium over the company’s 30-day average trading price.
  • In 2015, Peet’s Coffee bought US-based Stumptown Coffee Roasters and Intelligentsia Coffee.

According to Dealogic, the JAB-Keurig deal will be the biggest acquisition ever in the packaged coffee sector.

Keurig makes up 0.06% of the portfolio holdings of the S&P 500 Index (SPY) and the iShares Core S&P 500 (IVV). Consumer staples firms make up 9.8% of IVV’s portfolio holdings. You can visit Market Realist’s industry page for more information on nonalcoholic beverages.

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