Panera Bread being sold to Krispy Kreme owner
The owner of a chain known for making a guilty pleasure, sugary Krispy Kreme doughnuts, is buying another that has built its reputation around healthy eating, Panera Bread.
JAB, the investment firm that controls the Krispy Kreme chain and coffee brands Keurig, Peet's and Caribou, announced the $7-billion deal Wednesday to acquire Panera and turn it into a private company. Though known for its sandwiches, Panera is a major seller of coffee.
Panera's ascension as one of the most successful fast-casual chains shook up the restaurant industry, introducing higher quality ingredients than fast-food competitors, making wi-fi widely available and giving customers healthy options. The company has also stayed ahead of the technological curve by introducing digital ordering earlier than many competitors.
JAB gave few details about its plans for Panera, which has more than 2,000 locations and about $5 billion in annual sales.
But JAB spokesman Tom Johnson said customers shouldn’t expect to see other brands owned by the Luxembourg-based investment firm pop up in Panera.
“JAB’s investment philosophy with companies it acquires is they operate independently and continue to be managed by their management,” he said. "There’s no plan to integrate with other assets in the portfolio.”
The investment firm plans to maintain Panera's current executive leadership, including CEO and founder Ron Shaich.
"We strongly support Panera's vision for the future, strategic initiatives, culture of innovation, and balanced company versus franchise store mix," JAB partner and CEO Olivier Goudet said in a statement. "We are excited to invest in and work together with the company's management team and franchisees to continue to lead the industry."
JAB will pay $315 per share and assume $340 million in debt. Panera shares jumped 14.1% in pre-market trading to $312.49.
Bob Derrington, managing director and senior research analyst at the Telsey Advisory group, said Panera’s strong digital platform makes it attractive to JAB. Online ordering now accounts for about 24% of sales at company-owned locations.
“It’s a great fit,” Derrington said. “The technology piece that Panera essentially brings to them is the crown jewel that really benefits the business.”
Because JAB is privately held, it doesn’t disclose a lot about its strategies or intentions, but it does own other breakfast and coffee shops, including Caribou Coffee, Peet’s Coffee and Tea and Einstein Bros. Bagels.
“Panera fits with the nature of that portfolio, said Sara Senatore, managing partner and senior analyst at brokerage Bernstein. “Panera is the most aspirational and most identifies with health and wellness as opposed to Krispy Kreme, for example. It’s not clear how exactly they plan to use or leverage the different brands in the portfolio. Are they going to run all of them all separately?”
She added that Panera could use the heft of its brands to obtain greater purchasing power or might import the best practices from each brand.
The deal comes amid a sharp shift for the restaurant business. Table-service restaurant chains are losing customers to fast-casual competitors, while the entire business struggles amid lower grocery costs.
Visits to full-service restaurants are expected to decline by 2% in 2017, according to NPD Group. But the research firm projected that the quick-service category would enjoy a 1% increase.
Hours after the news broke, some Panera customers were expressing concern about what might happen to its more upscale nature and the company’s altruism.
Senatore said she doesn’t think JAB would change too much.
"I don’t think you buy at this type of premium if you’re going to totally undo and disrupt all the brand equity and customer loyalty it has," Senatore said. "It wouldn’t make sense to change too much about it.”
UBS analyst Dennis Geiger said Tuesday in a note to investors that "the rationale for a potential sale at this time is understandable," given Panera's streak of financial success, trendy menu, quality products and leadership.
Geiger said an acquirer might seek to expand Panera brand products available for sale at retail. The company currently sells an estimated $150 million in retail products annually, according to UBS, representing only a sliver of its business.
Shaich hailed the deal as the "best way to continue to operate with" the company's growth strategy. He agreed to vote his shares in favor of the deal, representing a share of about 15.5%.
"We are pleased to join with JAB, a private investor with an equally long-term perspective, as well as a deep commitment to our strategic plan," he said.
The companies expect the deal to close in the third quarter.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.