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In the waning days of 2015, my colleague Tony Daltorio made a prediction: At some point in 2016, Luxembourg-based coffee conglomerate JAB Holding Co. would purchase Dunkin’ Brands (NASDAQ: DNKN).
The suggestion made a lot of sense. JAB had recently announced its $13.9 billion acquisition of K-Cup owner Keurig Green Mountain, and adding a coffee-and-doughnuts company would bolster its already imposing portfolio of java purveyors.
Well, JAB just satisfied its doughnut craving, but it was through the acquisition of a different American company with a cult following: Krispy Kreme Doughnuts (NYSE: KKD).
The Krispy Kreme Challenge
Krispy Kreme is based in Winston-Salem, N.C., but it has locations scattered across the U.S. and 24 other countries. It nearly went belly up in the mid-2000s in the midst of an overly aggressive expansion effort and an accounting scandal, but it survived the worst of it and has seen its shares rise 230% over the past five years.
Krispy Kreme agreed to JAB’s $1.35 billion takeover offer on Monday, which represented a premium of about 25% from the stock’s closing price on May 6. Some may argue they overpaid, but for a company that has more than $50 billion in assets under management, $1.35 billion is the M&A equivalent of day-old doughnut prices.
In addition to Krispy Kreme, which sells its own line of coffee products, JAB Holding Co. now has the following coffee-related brands under its control:
- Keurig Green Mountain
- Peet’s Coffee & Tea
- Caribou Coffee
- Stumptown Coffee Roasters
In addition, JAB holds a majority stake in Jacobs Douwe Egberts, which controls D.E Master Blenders 1753 and the coffee division of Mondelez International (NASDAQ: MDLZ).
That brings me back to the original question of whether JAB might still make a play for Dunkin’ Brands.
I don’t see why not. Krispy Kreme has only one location in New England, while you can’t walk two blocks without seeing a Dunkin’ Donuts in many parts of Massachusetts. Dunkin’ would also give the conglomerate a presence in the fast-growing breakfast sandwich market.
If JAB Holding Co. is serious about its quest to eat into Starbucks’ (NASDAQ: SBUX) market share, it may want to lay down some dollars for Dunkin’.
Here are some of my favorite Wyatt Investment Research articles from the past week:
The Top 3 Pitches From the 2016 Sohn Investment Conference – The 2016 Sohn Investment Conference was once again packed with investment ideas, although presenters sent a lot of mixed signals this year.
Is Wall Street’s Netflix Love Affair Over? – Sometimes investor sentiment creates an ideal setup for a trade. That’s exactly what’s happening with a Netflix (NASDAQ: NFLX) love story potentially doomed for the rocks.
Shanghai Disney: The Hidden Winner – On June 16, The Walt Disney Co. (NYSE: DIS) will open the $5.5 billion Shanghai Disney Resort following more than a decade of planning and five years of construction. While Disney’s parks and resorts division is about to get a very big boost, another company is set to ride Disney’s coattails in China.
Facebook Investors Beware: There’s a New King of the Digital Hill – Despite Facebook’s (NASDAQ: FB) rollout of new products and grand plans for messaging and ads, there’s another social network that’s rapidly stealing eyeballs from the industry leader.
Why Hulu’s Streaming TV Service Is Huge News – Hulu is reportedly working on a new subscription-based streaming TV service that will let customers buy a package of channels for $40 per month. Don’t be surprised if the winds of change that are blowing in the television industry become headwinds for several cable companies.
How I Tried to Hit the Jackpot for Dividend Income – As time goes by, the excuses Wyatt Research income expert Steve Mauzy will accept dwindle for why a company should eschew paying investors dividend income.
Is the E-Cigarette Industry Going Up in Smoke? – After e-cigs burst onto the scene just a few years ago, Big Tobacco investors had high hopes. But the e-cigarette industry is looking riskier by the day following the release of sweeping regulations from the Food and Drug Administration.
3 High-Yield Monthly Dividend Stocks to Buy Now – High yield usually means high risk when it comes to dividends. Luckily, there’s high yield and little additional risk in a trio of monthly dividend stocks.
Have a great weekend!