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Peet's goes to Germany's Joh. A. Benckiser for $1B

by Vyvyan Tenorio | Published July 23, 2012 at 11:54 AM

Consumer goods company Joh. A. Benckiser GmbH struck an agreement to buy Peet's Coffee & Tea Inc. for $73.50 per share in cash, or roughly $1 billion in total, the parties announced Monday, July 23.

The buyer, a Ludwigshafen, Germany, holding company controlled by the Reimann family, is offering a 29% premium over Peet's closing stock price on Friday. The agreement has been unanimously approved by Peet's board of directors.

The news propelled Peet's shares upward 28.92% to trade at $73.69 by midmorning Monday and brought its market capitalization to about $980.4 million.

The purchase price equates to about 20 times Ebitda, comparable with how other iconic brands are trading, according to a source close to the transaction. The take-private should give a big boost to the San Francisco Bay Area coffee maker, known for its high-end gourmet coffee and tea products, whose shares had fallen sharply in May after weak first-quarter results.

Peet's was founded in 1966 in Berkeley, Calif., by Alfred Peet and was an early innovator in specialty coffees. As of Jan. 1, the company operated 196 retail stores in six states, selling whole-bean coffee, beverages, pastries, tea and sundry items.

Peet's net revenue rose 7% to $94.8 million in the quarter ended April 1, from $88.5 million in the prior-year period, but net income was down 40% to $3.4 million, from $5.5 million in the same periods. Cost of sales rose to 51% of net revenue, versus 46.6% for the same period last year. The increase was attributed primarily to 44% higher per pound green coffee costs and, to a lesser extent, higher milk costs.

JAB, which operates through subsidiaries Labelux Group GmbH, Coty Inc. and Reckitt Benckiser Group plc, provides household and personal care products in Germany, with brands such as Jimmy Choo, Bally and Belstaff.

The assets of the group are overseen by three senior partners: Peter Harf, Bart Becht and Olivier Goudet.

Peet's had prior discussions with potential strategic buyers, while JAB had looked at the company in the past, the source said. JAB approached Peet's about a month ago to initiate more serious talks.

At the closing, Peet's will continue to be operated by the company's current management team and employees and remain based in Emeryville, Calif.

Jean-Michel Valette, chairman of the board of Peet's, said in a statement, "In my experience it is rare to find a company and a brand as special as Peet's. We are pleased that JAB recognizes this and that Peet's existing shareholders will be rewarded with significant value."

"At JAB, we are committed to owning and investing in companies with strong, premier-quality brands and great people whose values we share," said Becht, chairman of JAB.

BDT Capital Partners LLC, a Chicago merchant bank that provides long-term private capital and advice to closely held companies, is participating in this transaction as an adviser and minority investor.

The transaction is structured as a one-step merger with Peet's as the surviving corporation. It is not subject to a financing condition and is expected to close in about three months, pending customary closing conditions. It does require the affirmative vote of holders of a majority of the company's outstanding shares, which will be sought at a special meeting of shareholders.

Citigroup Inc., led by Jeffrey Schackner, global head of consumer products, was Peet's exclusive financial adviser. It also delivered a fairness opinion to Peet's board. Kenneth Guernsey of Cooley LLP also advised Peet's on this transaction.

A team from Skadden, Arps, Slate, Meagher & Flom LLP, comprising Sean Doyle, Paul Schnell, David Rievman, Paul Oosterhuis, Bruce Goldner and Jon Hlafter, represented JAB. Morgan Stanley's David Ciagne and BDT's Byron Trott are serving as financial advisers to JAB.

Munger, Tolles & Olson LLP's Mary Ann Todd, Brett J. Rodda and David B. Goldman represented BDT Capital.

-- David Marcus contributed to this report.

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Peet's goes to Germany's Joh. A. Benckiser for $1B

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