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Krispy Kreme, Jamba may be entrees on takeover menu

  • Article by: LESLIE PATTON
  • a nd TARA LACHAPELLE Bloomberg News
  • January 7, 2013 - 8:20 PM

CHICAGO - Following the biggest surge in takeovers of restaurant and coffee companies since the last recession, Krispy Kreme Doughnuts Inc. and Jamba Inc. could be next on the menu.

Acquisitions of U.S. restaurant, tea and coffee companies from Peet's Coffee & Tea Inc. to Teavana Holdings Inc. reached $6.1 billion last year, the highest level since 2008, according to data compiled by Bloomberg. Deals are on the rise as sales growth at coffee and snack shops are forecast to outpace fast-food chains through 2017, data from IBISWorld Inc. show. Since Joh. A. Benckiser Group announced plans Dec. 17 to buy Caribou Coffee Co., Krispy Kreme shares have climbed 21 percent to the highest in more than five years, while Jamba rose 19 percent.

Krispy Kreme, which introduced a new coffee lineup in 2011, and Jamba, the smoothie maker projected to post its first profit since 2005 this year, may be targeted for their well-known brand names and the chance to expand into grocery and mass retail stores, said B. Riley & Co. and Pacific Management Consulting Group.

Even after Krispy Kreme shares climbed 43 percent in a year, the doughnut seller still trades at a lower earnings multiple than 97 percent of U.S. restaurants valued at more than $100 million, data compiled by Bloomberg show.

"They're iconic brands and it takes forever to build that brand equity," Conrad Lyon, an analyst at Los Angeles-based B. Riley, said in a telephone interview. "To be able to write a check and add that to your portfolio is probably pretty attractive."

Brian Little, spokesman for Winston-Salem, N.C.-based Krispy Kreme, and Matt Lindberg, spokesman for Emeryville, Calif.-based Jamba, declined to comment.

In addition to its pending $340 million purchase of Caribou, Benckiser also acquired Peet's last year for about $1 billion. Starbucks Corp.'s $620 million takeover of Teavana was disclosed in November and completed last week.

Those acquisitions helped push industry takeovers last year to the highest since 2008, when deals peaked at $7.5 billion.

Sales at coffee, hot-beverage and doughnut chains are outpacing fast-food revenue as on-the-go consumers shift to snacks instead of full restaurant meals, according to June and July reports from IBISWorld. Coffee and snack shop sales are forecast to increase 4 percent annually to $33.9 billion in 2017, compared with growth of 1.9 percent a year for fast-food chains, the Santa Monica, Calif.-based researcher said.

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