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$1 Billion Peet’s Purchase Suggests Long-Term Industry Growth

A stock market analyst believes the $1 billion purchase of Peet’s by the German conglomerate Joh. A. Benckiser suggests JAB believes in the long-term health of the specialty coffee market in the United States.

Peet's On East Coast with medium roasts

Peet’s Coffee & Tea logo

JAB, which runs an investment portfolio stocked with high-end consumer goods companies, including Jimmy Choo, is paying a fairly full price for Peet’s, analysts have said since yesterday’s deal was announced. The deal is valued at $73.50 in cash, which is approaching the stock record of $77.60 on March 28, and reflects an approximately 30 percent increase over Peet’s 2013 predicted earnings.

Writes MarketWatch analyst Matt Andrejczak:

Peet’s was “poised to have strong year in 2013, perhaps even stronger than estimates out there,” Gabelli & Co. analyst Joseph Gabelli said in an interview.

Boosted by cheaper costs to buy unroasted green coffee beans, Peet’s was estimated to earn $2.26 a share in 2013, up 30% from the analyst forecast of $1.74 a share this year, according to FactSet.

JAB is “getting high quality asset here,” added Gabelli. “They are strong brand.”

Don’t expect major changes at Peet’s, whose current management team led by CEO Patrick O’Dea will continue in their roles.

JAB, run by former Reckitt Benckiser CEO Bart Becht, is a patient buy-and-hold investor that lets management teams run their businesses. It doesn’t follow the same playbook of other private-equity owners who cut jobs, pile on debt and flip the company to another buyer in five years.

The full story: MarketWatch


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