JAB seeks valuation of up to €16bn for coffee business

JAB Holdings is seeking a valuation of up to €16bn for its JDE Peet’s coffee business and has secured investments from funds managed by billionaire George Soros and Fidelity for Europe’s biggest listing since 2018.

JDE aims to raise as much as €2.25bn which, if achieved, would surpass any initial public offering since German train brake maker Knorr-Bremse raised €3.8bn in 2018, according to data provider Refinitiv. 

The company, which owns coffee brands including Douwe Egberts, Kenco and Jacobs, is one of a handful of groups that have braved Europe’s IPO market since the onset of the coronavirus crisis and is counting on the resilience of coffee consumption during the downturn to fuel demand for the deal.

JDE is seeking a valuation of between €14.9bn and €16bn by selling more than 23m shares priced at €30-€32.25 each, according to the prospectus published on Tuesday. Its shares are due to begin trading on Amsterdam’s Euronext exchange next week. 

The company has secured cornerstone investment worth €100m from Quantum Partners and Palindrome Master Fund, both managed by Soros Fund Management, and €361m from Fidelity. In addition to the outside investment JAB, which manages the wealth of Germany’s billionaire Reimann family and owns a majority stake in JDE via a holding company, plans to increase its ownership by buying €300m in new shares.

Widespread lockdowns have sent a chill through Europe’s IPO market, with an 80 per cent drop in flotation proceeds and over-allotments so far in 2020 compared to the same period in 2019, according to Refinitiv. 

“We believe that JDE Peet’s is well positioned to be at the forefront of reopening the IPO market,” said Olivier Goudet, JAB’s managing partner. 

The listing will be a test of the strategy JAB has pursued over nearly a decade of consolidating the global coffee industry. Last year the group merged Jacobs Douwe Egberts Group, the second-largest coffee roaster globally after Nestlé, with the US retail coffee brand Peet’s and overhauled its management as it prepared for the IPO.

JDE Peet’s mainly sells coffee beans and capsules through retail stores, under brands such as L’Or, Senseo, Tassimo and Kenco and the company plans to use €700m to pay down existing debt. 

Almost 80 per cent of sales are derived from coffee drunk at home. JAB thinks that the social and economic effects of coronavirus will endure for years, bolstering long-term demand for at-home coffee. 

JAB is also involved in a turnround at Coty, another well-known consumer business in its portfolio. Earlier this month, US private equity group KKR injected $750m into the debt-laden cosmetics maker as part of its plan to become the majority shareholder in the company’s professional beauty and haircare division.

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