Coverage: Krispy Kreme parent buying Panera Bread for $7 billion

JAB, the investment firm that controls the Krispy Kreme chain and coffee brands Keurig, Peet’s and Caribou, announced the $7-billion deal Wednesday to acquire Panera Bread.

Nathan Bomey and Zlati Meyer of USA Today had the news:

Though known for its sandwiches, Panera is a major seller of coffee.

Panera’s ascension as one of the most successful fast-casual chains shook up the restaurant industry, introducing higher quality ingredients than fast-food competitors, making wi-fi widely available and giving customers healthy options. The company has also stayed ahead of the technological curve by introducing digital ordering earlier than many competitors.

JAB gave few details about its plans for Panera, which has more than 2,000 locations and about $5 billion in annual sales.

But JAB spokesman Tom Johnson said customers shouldn’t expect to see other brands owned by the Luxembourg-based investment firm pop up in Panera.

“JAB’s investment philosophy with companies it acquires is they operate independently and continue to be managed by their management,” he said. “There’s no plan to integrate with other assets in the portfolio.”

Jacob Barker of the St. Louis Post-Dispatch reported that the deal was a surprise:

Unlike other St. Louis-based companies that have been bought up, there were no financial struggles indicating a sale was coming, no succession questions, no negotiation drama. Panera’s sale came out of the blue, even to analysts who follow the industry.

“This definitely was a surprise,” said Jack Russo, an analyst at Edward Jones who follows Panera and other consumer brands. “The company had been performing pretty well, especially versus the rest of the industry.”

“Pretty well” may be an understatement. Panera’s stock was trading at 33 times expected earnings, well above the industry average of 24.7, according to Thomson Reuters Datastream. From 100 bakery-café restaurants 20 years ago, Panera has grown to 2,000 with sales of $5 billion.

JAB has offered $315 in cash per Panera share, representing a 20.3 percent premium to the stock’s closing price on March 31, the last trading day before media reports of a potential deal. Shareholders “certainly can’t complain at the offer price,” Russo said. The company’s stock closed at $312.94 on Wednesday, up 14.2 percent. The deal is expected to close in the third quarter.

JAB, the investment vehicle of Germany’s billionaire Reimann family, is run by Chief Executive Olivier Goudet, who is also the chairman of Anheuser-Busch InBev.

Ed Hammond, Alex Sherman and Leslie Patton of Bloomberg News report the deal is a bet on the lunch crowd:

The deal vaults JAB into the fast-casual restaurant market — a category that touts fresher ingredients and includes the likes of Chipotle Mexican Grill Inc. and Shake Shack Inc. It also gives the firm access to lunch and dinner crowds, which its current roster of brands doesn’t reach as well.

For Americans, the transaction means one more household name will be under the banner of the little-known European holding company. JAB, an investment vehicle of Austria’s billionaire Reimann family, has already scooped up Caribou Coffee, the Einstein Noah Restaurant Group, Peet’s Coffee & Tea and Stumptown Coffee Roasters in a frenzied buying spree.

“No one’s ever gone about such an aggressive, far-reaching acquisition trail, with such a focus on the United States,” said Jeffrey Young, managing director of coffee consulting firm Allegra Strategies.

“They’ve very quickly become one of the three most influential companies in coffee,” he said, with JAB standing alongside Starbucks Corp. and Nestle SA. “One wonders what is next for them.”

The Panera purchase follows the game plan of JAB’s previous deals, where it grants control to a local management team. Panera Chief Executive Officer Ron Shaich, who founded the bakery chain and has become a well-known advocate for using natural ingredients, will continue to run the business after the acquisition.