Mondelez and D E Master Blenders to merge coffee business
08 May 2014
Mondelez International Inc and D.E Master Blenders 1753, two of the world's largest coffee sellers, are merging their coffee business to create the world's biggest pure-play coffee company with annual sales of $7.3 billion.
Illinois-based Mondelez, the snack food business that was spun off from Kraft Foods in 2012, will merge its coffee brands with D.E Master Blenders' coffee portfolio into a new joint venture company called Jacobs Douwe Egberts.
Mondelez will bring in brands such as Jacobs, Carte Noire, Gevalia and Tassimo to Jacobs Douwe Egberts, while D.E Master Blenders will bring brands such as Douwe Egberts, L'OR, Pilao and Senseo.
Jacobs Douwe Egberts will be controlled by D.E Master Blenders' parent JAB Holding Co, and Mondelez, run by Irene Rosenfeld, would receive after-tax cash proceeds of about $5 billion and a 49 per cent stake in the company.
Post closing, JAB Holding will hold a majority 51 per cent stake in Jacobs Douwe Egberts and will have a majority of the seats on the board, which will be chaired by current Master Blenders chairman Bart Becht, while Mondelez will have certain minority rights.
Jacobs Douwe Egberts will be based in the Netherlands and will hold leading market positions in more than two dozen countries and have a strong emerging market presence in the $81 billion global coffee industry.
Mondelez and Master Blenders are the world's second and third-biggest coffee companies after Swiss food giant Nestle SA.
Mondelez's coffee business generated about $3.9 billion in revenue last year, while Amsterdam-based Master Blenders had sales of $3.4 billion.
Master Blenders, owner of Douwe Egberts coffee, was acquired in 2013 by German private investment firm Joh A Benckiser for $9.8 billion. (See: Germany's Joh A Benckiser to acquire D E Master Blenders 1753 for $9.8 billion)
Master Blenders, which was spun out of Sara Lee in 2012, is an international coffee and tea company, whose 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. Pilão is the number one coffee brand in Brazil, and Merrild is the favourite in Denmark.
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.
Joh A Benckiser, the investment arm of JAB Holding, which also owns more than 15 per cent in Reckitt Benckiser, had spent a total of $1.34 billion in 2012 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)
Mondelez, the owner of Cadbury, Oreo cookies, and Trident gum, holds the No 1 positions in 10 countries in Europe in the coffee segment and No 2 positions in eight countries in Europe and Morocco and China, with a major part of its revenue in coffee coming from France, Germany, Britain, and Russia.
Mondelez said it would use a majority of the $5 billion from the deal to expand its $2 billion share buyback program, and the remainder to pay down debt.
''Jacobs Douwe Egberts will leverage the rich histories of both companies, combining our complementary geographic footprints, portfolios of iconic brands and innovative technologies to offer more people around the world more access to high-quality coffee and allowing the company to capitalize on the significant growth opportunities in a highly attractive market,'' said Pierre Laubies, CEO of D.E Master Blenders.
''We're delighted with this transaction and the substantial value we expect to create for our shareholders,'' said Irene Rosenfeld, chairman and CEO of Mondelez, whose coffee portfolio has outpaced market growth since 2010, due to Tassimo multibeverage on-demand brewing system and Millicano wholebean instant coffee.
''By retaining a significant stake in the combined company, we'll continue to benefit from the future growth of the coffee category and share in the synergies and tremendous upside of this leading, one-of-a-kind coffee company,'' she added.
The deal is expected to close in 2015, subject to regulatory approvals.