JAB Holding Company announced it would acquire Panera Bread for $7.5 billion to further its presence in the US fast-casual restaurant market. The transaction is expected to close in Q3 2017. The acquisition also gives JAB access to Panera’s experienced management. Chief Executive Ron Shaich and the management team will continue leading Panera after the deal is finalized.
JAB is a European family business that has acquired a number of US brands since 2012, including:
- Krispy Kreme for $1.35 billion in 2016
- Keurig for $13.9 billion in 2015
- Einstein Bagels for $374 million in 2014
- Peet’s Coffee and Tea for $973.9 million in cash in 2012
- Caribou Coffee for $350 million in 2012
Competing with Starbucks
JAB may begin serving Peet’s and Caribou coffees in Panera’s 2,000 restaurants in order to compete with Starbucks, the leading coffee brand.
Although Panera and Starbucks both sell coffee, teas and food, Panera is best known for its relatively healthy soups, sandwiches and salads while Starbucks is best known for its premium coffee and teas.
While Starbucks is unquestioningly the dominant player in the US for coffee and tea, when it comes to food, Panera has Starbucks beat. When customers want a healthy, inexpensive lunch they think of going to Panera, not Starbucks, for soups, salads, and sandwiches.
“Panera’s food will always be better than what Starbucks can offer. Starbucks is not designed to offer that high-end food. They don’t have the kitchens,” says analyst Peter Saleh.
It will be interesting to see if this acquisition affects Starbucks and how the company reacts. Will they acquire a company to beef up their food? Or will they double down on their drink offerings? The company acquired Teavana in 2012 for $620 million in cash in order to diversify its products.
The Advantages of Privately-held Companies
In addition, Starbuck still faces the pressure of being a publicly traded company while Panera will be able to go private with this deal. In fact, going private was one of the drivers for this deal.
While launching an IPO provides capital that can fuel a company’s growth, there are also drawbacks to going. Public companies must answer to shareholders, spend time on SEC filings, and announce their strategic growth plans to the public, which includes their competitors.
On the other hand, privately held companies are able to focus on long-term growth rather than quarterly earnings reports. They can also be more discreet in executing their strategic plans. Be under the radar with strategic growth plans.
Ron Shaich, Panera’s CEO put it this way:
“For the last 20 years, I’ve spent 20 percent of my time telling people what we’ve done to grow and another 20 percent of my time telling people what we’re going to do to grow. I won’t have to do that anymore.”