Caribou Coffee Company Inc.
) inked a definitive merger agreement with German private equity
company, Joh. A. Benckiser (JAB) Group. Per the deal, JAB will
acquire Caribou Coffee through an all-cash deal worth
approximately $340 million or $16.00 per share.
The offer price is at a 30% premium to Caribou Coffee's closing
stock price as on December 14, 2012, the last trading day prior
to the announcement of the transaction. Upon the closure of the
deal, Minneapolis, Minnesota-based Caribou will continue to
operate as an independent company retaining its brand, management
team and growth plan. The deal is expected to be sealed in the
first half of 2013.
JAB and its affiliates focus on investments in premium brands in
the rapidly growing Consumer Goods category. There is another
U.S.-based coffee roaster cum retailer in JAB's portfolio ???
Peet's Coffee and Tea. JAB group took over Peet in October this
year. Apart from Peet, JAB group has a minority stake in D.E
Master Blenders 1753 N.V., an international coffee and tea
We view the deal as strategically positive as it holds immediate
cash value for the shareholders of Caribou at a premium over the
current trading value. The deal will likely benefit this
second-largest company-owned premium coffeehouse operator of the
U.S. as its acquirer also operates in the same vertical and has
prior knowledge of handling coffeehouses.
On the other hand, the acquisition holds significant promise for
JAB Group as well. Apart from enjoying a leading position by the
virtue of its size, Caribou stands out to be a lucrative
acquisition target given its strong growth strategy, untainted
balance sheet and solid fundamentals.
As of September 30, 2012, Caribou Coffee had 610 coffeehouses, of
which 408 were company-owned and 202 franchised. It remains
focused on unit growth of 10%???12% in 2012 and 2013.
Caribou's association with JAB will bring greater diversity to
the latter's consumer products business and prepare the German
company to strive in the specialty coffee market through sector
As far as valuation goes, a few analysts believe that the offer
price does not complement the company's potential. The offer
price of $16 per share is substantially below Caribou's 52-week
high of $18.84 per share as well as the recent target prices set
by several analysts.
However, the analysts believe that a competing bid for Caribou
Coffee is unlikely. Caribou which competes with the likes of
Dunkin' Brands Group Inc
) currently has a Zacks #3 Rank, which translates into a
short-term 'Hold' recommendation.
CARIBOU COFFEE (CBOU): Free Stock Analysis
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