Commentary

JAB Holdings Buying Pret A Manger As The Coffee War Intensifies

With one eye on global expansion and the other on Nestlé, JAB Holdings yesterday gobbled up the British sandwich shop Pret A Manger — Ready To Eat — from the private equity firm Bridgepoint and minority investors for an undisclosed amount.

“The Pret deal is the latest in a series of coffee and drinks-focused acquisitions by JAB, the Luxembourg-based investment vehicle that manages the fortune of Germany’s reclusive Reimann family,” Javier Espinoza and Arash Massoudi report for Financial Times, which broke the news of the transaction. “The sale would be a lucrative exit for Pret’s owners, Bridgepoint, the U.K. private equity group, which initially paid £364 million ($483 million) including debt to buy the business a decade ago,” they continue.

“Coffee is one of the fastest-growing consumer businesses, particularly in the U.S., the world’s largest coffee market,” where Pret currently has 92 shops but faces stiff competition,” Espinoza and Massoudi point out.

“Pret operates 530 stores worldwide, generating group revenues of £879 million ($1.17 billion),” the BBC reports, adding that a source put the sale price at £1.5 billion, or nearly $2 billion. The transaction will be completed this summer if all goes according to plan. 

“The purchase is the most recent salvo in a coffee war that recently saw Swiss rival Nestlé score a major marketing deal for Starbucks coffee to boost its position in the U.S. market,” writes Kerstin Leitel for Handelsblatt Global. 

Pret “caters to the very British love of sandwiches, and its outlets are ubiquitous in London, home to two-thirds of its stores. But it’s also present in other countries and has announced plans to expand to Germany this fall. JAB’s takeover will likely reinforce that strategy,” Leitel continues.

“JAB punctuated its ambition to become one of the world’s largest owners of consumer-focused food and drinks brands in January, saying it would pay $26 billion to buy Dr Pepper Snapple Group Inc., the No. 3 soft-drink company in the U.S. It already owns Peet’s Coffee & Tea, Krispy Kreme doughnuts and Panera Bread Co. after a decades-long acquisition spree. In late 2015, JAB took control of Keurig Green Mountain in a $13.9 billion deal that further expanded its coffee business,” the Wall Street Journal’s Saabira Chaudhuri reminds us.

And, among other moves, that roundup ignores its purchase of Stumptown Coffee in 2015 to the dismay of coffee snobs in Portland, Ore., as well as the launch of its craft coffee retail site, Trade, last month, as reported by Grub Street’s Clint Rainey. 

McDonald’s took a 33% stake in Pret in 2001, the WSJ’s Chaudhuri reports, but “Pret’s ensuing rapid international expansion, in which it opened 14 stores in Japan, brought the company close to bankruptcy. It was forced to retrench and cut costs. McDonald’s sold its stake to Bridgepoint in 2008.”

Pret A Manger CEO Clive Schlee tweeted that the company's 12,000 workers would each receive a bonus of £1,000 ($1,325) as a result of the sale. “The £1,000 bonus will be paid to all employees who are on the payroll during the week the deal completes,” he said. “It's serendipity for those who have just joined,” Charles Riley reports for CNN Money.

Schlee also proclaimed it a “day of celebration” for the company,” Russell Jackson writes in The Scotsman. “This agreement recognizes the hard work of all our amazing teams around the world. Bridgepoint has been wonderful owners of the business for more than a decade. All of us at Pret believe JAB will be excellent long-term strategic owners. JAB believes in Pret’s values and supports our growth plans.”

JAB CEO Olivier Goudet shared the bonhomie in a statement. 

“We’re very excited to partner with Pret and its talented team to continue their extraordinary growth story. Management’s proven track record and commitment to customer service, investment in innovation and approach to freshly prepared food position Pret well as it capitalizes on evolving consumer taste and lifestyle preferences,” he said. “We look forward to working with Clive Schlee and his management team, while promoting the Pret brand and supporting Pret’s impressive culture for the next phase in the company’s growth with JAB.”

All that’s missing is a handmade egg salad and arugula sandwich and a Dark Roast 100% Arabica blend “with a strong caramel-y sweetness and nutty undertones” to seal the deal.

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