Panera Bread and Krispy Kreme Operate Under the same Vehicle
Panera Bread and Krispy Kreme Operate Under the same Vehicle
On April 5, 2017 it was announced that Jab Holding Co. has acquired Panera Bread, one of the most health conscious company in the restaurant industry. The acquisition was valued at $7.5 billion including Panera Bread’s debt of $340 million. Panera Bread is being valued 19 times earning before interest, tax, depreciation and amortization (EBITDA). In other words, JAB is evaluating Panera Bread’s operating performance without acknowledging the firms financial and accounting decisions. By doing so, JAB can use this evaluation of $7.5 billion compared to Panera Bread’s competition. It is considered the best way to assess a company’s profitability.
JAB Holding Co specializes in long-term investments in brands such as luxury brands, coffee and healthcare sectors. It is 95% owned by the Reimann family, a German billionaire who also owns, well-known brands like, Caribou Coffee, Peet’s Coffee & Tea, Krispy Crème, Green Mountain Coffee, Timothy’s Coffee and many more. In fact, according to recent data in 2015 JAB became the world’s largest coffee maker by volume. The firm has been able to climb the ladder by simply focusing and having an aggressive approach of acquiring American based companies. With this acquisition, JAB will now be able to access lunch and dinner crowds shifting from the breakfast crowd that they already dominate. Now the well diverse and privately owned company, JAB will be to compete with three of the top coffee industry companies, Starbucks and Nestle.
Also, JAB’s investment in mobile ordering and digital technology makes even more sense why the acquisition of Panera Bread, the best digital platform within the restaurant industry, was a smart move by the company. We all have been to Panera at least once and it is wonderful experience to be able to use Kiosk to order food making. My trip to Panera Bread this morning, like any other time, always seems to go very smoothly. Every time, within just a couple of minutes, a server quickly comes out with the food. Ten years ago, we didn’t have to privilege of ordering through a Kiosk, even better ordering online for our food. Also, ten years ago Panera Bread shares were valued at $33.08, which is about nine times the original value. Up to date, Panera has about $5 billion in sales nationwide, who wouldn’t want to buy this company?
It gets even better, Ron Shaich, CEO of Panera Bread will continue to operate the business even after the acquisition. After Olivier Goudet, CEO of JAB has decided and informed the public that Panera will continue to run on its own track, showing a good sign of trusting relationship. In fact Mr. Goudet will continue to support Panera’s vision, strategic initiatives and innovation. In Mr. Shaich own words, “We believe this transaction with JAB offers the best way to continue to operate with this approach. We are pleased to join with JAB, a private investor with an equally long-term perspective, as well as a deep commitment to our strategic plan”. That being said, Mr. Schaich and his management team will remain and continue to manage the company, again another sign of TRUST. When dealing with partnerships it is important to have both parties vision and objectives aligned, making it less challenging in the future.
The fact that Panera Bread is ran by majority of independent owners with no interest in franchising the company aligns, the privately owned, JAB Holding Co vision. Additionally, Mr. Shaic, the 64 year old, allowed this transaction in hopes of taking Panera Bread private. After 20 years of hard work building his company, Mr. Shaich believes this acquisition will benefit both parties in the long run. Within the first quarter of 2017, this M&A became the third biggest deal in the restaurant industry. Although, the acquisition isn’t expected to close until the third quarter, investors now have to dig deep and decide whether investing into both companies will be a good idea.
Sources: CNBC, Denverpost, New York Times, Forbes