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JAB to raise up to €3bn in IPO of Douwe Egberts and Peet’s Coffee

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Via Financial Times

JAB Holdings is combining some of the world’s best-known coffee brands to create a stronger challenger to Nestlé and Starbucks, aiming to raise as much as €3bn from a European listing next year according to people with knowledge of its plans.

The investment company will merge Jacobs Douwe Egberts Group, the world’s second-largest coffee roaster by volume after Nestlé, and Peet’s Coffee, a premium retail US coffee brand, into a single entity to prepare for the listing. If the float takes place, JDE Peet’s will be the largest publicly traded coffee company with roughly €7bn in annual sales. It will be run by Peet’s chief executive Casey Keller.

The listing will be one of the largest European initial public offerings slated for 2020. JAB has yet to decide on a venue but is strongly considering the Amsterdam bourse, given the centuries-old Dutch lineage of Douwe Egberts.

The main reason for the listing is to allow an exit for investors that have backed JAB as it has embarked on a deal spree costing more than $50bn across the consumer sector in recent years, said one of the people.

To fuel its expansion, JAB has raised about €12bn since 2012 from university endowments, sovereign wealth funds and rich families, with coffee acquisitions the main focus. US consumer goods group Mondelez will also get the option to sell down its 26 per cent stake in JDE Peet’s, which it received through the merger of its European coffee business with JAB’s Douwe Egberts brands in 2015.

A listing will be an important test for JAB, which was created to manage the wealth of Germany’s billionaire Reimann family, as it seeks to prove that it can be a successful operator of businesses and not simply a dealmaking machine.

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The mooted IPO comes following a difficult year in which JAB has had to rebuild after one of its trio of managing partners, Bart Becht, left after disagreements about strategy. One of its oldest investments, the cosmetics maker Coty, has also stumbled.

The stakes are high for one of JAB’s two remaining managing partners, Olivier Goudet, who came up with the idea of building a global coffee business and pitched the plan to the Reimann family and JAB chairman Peter Harf in 2012, when he was still at Mars. Mr Goudet then joined JAB to carry it out.

JAB is in the process of raising additional funds from outside investors, and is on track to collect $8bn by the middle of next year.

JDE Peet’s business is mostly focused on selling packaged roasted coffee beans and capsules under brand names such as Tassimo, Senseo, and L’Or, but a small part of its sales come from preparing hot drinks for customers in Peet’s coffee shops in the US. JDE Peet’s also owns upmarket speciality US coffee shops such as Intelligentsia Coffee & Tea, as well Stumptown Coffee Roasters.

Annual profit has not been disclosed, nor the estimated valuation that JDE Peet’s is seeking from the listing.

Although coffee bean prices paid to farmers remain depressed because of oversupply, business is booming for companies that roast and package coffee.

As a result, the still-fragmented sector has been consolidating, with Nestlé seeking to maintain its leadership position and relative newcomers such as JAB and Coca-Cola, which bought the UK’s Costa Coffee last year, striking deals to catch up.

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In addition to JDE Peet’s, JAB’s coffee portfolio includes a 67 per cent stake in Keurig Dr Pepper, which sells packaged coffee and capsules for Keurig-branded machines.

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