Germany's Joh A Benckiser to acquire D E Master Blenders 1753 for $9.8 billion
13 April 2013
German private investment firm Joh A Benckiser (JAB) has agreed to acquire Dutch coffee and tea company D E Master Blenders 1753, for €7.5 billion ($9.8 billion) in order to compete with market leaders Nestle and Kraft spin-off Mondelez International.
The acquisition when completed would be the largest deal in Europe this year, and would be the latest coffee acquisition by JAB, which also owns well-known brands like Jimmy Choo, Bally and Belstaff.
A group of investors led by JAB, the investment vehicle for the Reimann family, which also holds stake in household products maker Reckitt Benckiser and fragrance company Coty, will pay €12.50 per share in cash, a 36 per cent premium to the stock's average closing price in the three months before the proposal was disclosed.
The acquisition will be carried out through Oak Leaf B V, a newly incorporated company that is wholly owned by the JAB led investor group and the board of D E Master Blenders fully supports and unanimously recommends the offer.
D E Master Blenders had said on 30 March that it was in takeover talks with a group led by JAB in a deal valuing the owner of Douwe Egberts coffee at €12.75 a share or €7.58 billion ($9.70 billion). (See: Dutch coffee maker D E Master Blenders in takeover talks with Joh A Benckiser)
The announcement sent its share price soaring by 25 per cent that day.
Amsterdam-based Master Blenders, which was spun out of Sara Lee last year, is an international coffee and tea company, with annual sales of €2.7 billion. Since its spin-off, JAB had slowly built a 15 per cent holding in the Dutch coffee company.
Its coffee and tea products are sold in more than 45 countries and 70 per cent of its revenue comes from markets where it holds a No 1 or No 2 position.
It has an extensive range of 30 well-known tea and coffee brands. Its iconic Douwe Egberts brand, founded in the Netherlands in 1753, is the number one coffee brand in the Netherlands and Belgium, and has solid market positions in the UK and Hungary. Pil„o is the number one coffee brand in Brazil, and Merrild is the favourite in Denmark.
In the Netherlands, Czech Republic, Hungary and Denmark, its Pickwick tea is the number one brand while Hornimans is the number two choice in Spain.
In the out of home segment, which represents 23 per cent of the coffee market, D E Master Blenders is present in 18 countries and holds the No 1 or No 2 position in seven of those markets.
Sara Lee Corp, the US consumer goods giant had in 2011 acquired its Dutch partner, electronics giant Philips stake in the Senseo coffee brand, for €170 million ($223 million).
Sara Lee and Amsterdam-based Philips had formed a 50-50 joint venture in 2001 to launch the Senseo coffee brand, with Sara Lee providing fresh ground coffee pods and Philips distributing the single-serve machines.
The brand soon became a household name in the Netherlands, with more than half of Dutch and a quarter of French and German households having a Senseo coffee maker.
During the period of the JV, the two companies sold over 33 million appliances worldwide.
JAB said that Master Blenders will continue to be a separate company with it headquarters, including the relevant head office functions and the company's center of management will remain in the Netherlands and keep all of its manufacturing facilities that are currently in the Netherlands operational.
JAB's Bart Becht, a former chief executive of Reckitt Benckiser who will become chairman of Master Blenders, said that JAB plans to keep the Dutch company separate from its US coffee shop business.
Vienna-based JAB, which also owns more than 15 per cent in Reckitt Benckiser, the world's largest maker of household cleaners, had earlier said that the company would invest in premium and unique brands in attractive growth categories like coffee.
It spent a total of $1.34 billion last year in acquiring Minnesota-based Caribou Coffee and California-based Peet's Coffee & Tea Inc. (See: Germany's Joh A Benckiser to acquire Peet's Coffee & Tea for $1 bn) and (See: Benckiser snaps up Caribou Coffee for $340 million)
Its latest deal will make it compete with Nestle and Mondelez in the $116 billion global coffee and tea industry if it expands Master Blenders beyond Europe and makes acquisitions in emerging markets.