(Corrects company name in 4th paragraph to Mondelez from Kraft)
* D.E Master Blenders says gets bid approach from JAB
* Says JAB proposing 12.75 euros per share
* JAB is firm's top shareholder, owns other hot drinks
* D.E Master Blenders says opens books, no certainty of deal
* Its shares jump over a quarter in value
By Sara Webb
AMSTERDAM, March 28 German investor Joh A
Benckiser (JAB) is in talks over a 6.4-billion-euro deal ($8.2
billion) to buy the owner of Douwe Egberts coffee and bolster
its position in a hot drinks industry benefiting from innovation
and emerging market growth.
Shares in Dutch coffee and tea firm D.E Master Blenders 1753
leapt over a quarter on Thursday after it said it had
received a bid proposal from JAB, the investment vehicle of the
billionaire Reimann family which is already its top shareholder.
JAB has been building a portfolio of brands including
Caribou Coffee Co Inc and Peet's Coffee & Tea Inc
to become a powerhouse in an industry being fuelled
by new products like single-serve coffee brewers and demand from
emerging middle classes in developing markets.
D.E Master Blenders, whose brands include Senseo coffee pods
and machines as well as Douwe Egberts and Pickwick tea, was spun
off last year by U.S. group Sara Lee, now known as Hillshire
Brands, and is the No. 3 global coffer player after U.S.-based
Mondelez International and Swiss market leader Nestle
The Dutch firm has struggled to benefit from a growing
global industry, in part because of its exposure to
austerity-hit European markets.
"We would envisage a very high chance of a transaction
here," said research firm Olivetree in a note, noting that JAB
already owned at least 15 percent of D.E Master Blenders and
other bidders had not surfaced at the time of the spin-off.
However, they said companies like Mars and Tchibo had been
mooted as potentially interested parties.
D.E Master Blenders said it had agreed to open its books to
JAB based on its proposal to pay 12.75 euros a share on a
fully-diluted basis, including any future dividend, but that
talks were at an early stage and there was no guarantee of a
The Dutch firm said it was being advised by investment banks
Goldman Sachs, Lazard, and JP Morgan, and by lawyers Allen &
Overy. A spokeswoman for JAB declined to comment.
At 1255 GMT, D.E Master Blenders' shares were up 26.5
percent at 12.155 euros. The stock had previously made little
progress since the spin-off from Sara Lee, closing at 9.61 euros
on Wednesday compared with its debut price of 9.79 euros.
The indicated price values D.E Master Blenders at a forecast
2013 EV/EBITDA (or the ratio of enterprise value to earnings
before interest, tax, depreciation and amortisation) of 16
times, Nomura analysts said in a research note, and a forecast
2013 price/earnings multiple of 24.3.
"As a benchmark, the recently-concluded Heinz deal by 3G was
at a 2013 EV/EBITDA of 14.6 times," Nomura said.
Even prior to the bid approach, D.E Master Blenders' shares
had traded at a premium to peers, partly on speculation that JAB
would increase its stake or eventually make an offer for the
firm, and on hopes that a new chief executive, who took over in
December, would turn around its performance.
The Reimann fortune comes from the Benckiser chemicals
company, founded in 1823 and one of the predecessor companies of
London-based Reckitt Benckiser Group Plc. The family also
controls fashion group Coty, and owns Labelux Group,
manager of luxury brands Bally, Belstaff and Jimmy Choo.
JAB agreed to buy Caribou Coffee Co Inc for about $340
million in December, after snapping up Peet's Coffee & Tea Inc
for about $1 billion in July.
It raised its stake in D.E Master Blenders in October to
just over 15 percent, although Olivetree said the company could
have since upped that to just under 20 percent.
Last month, D.E Master Blenders posted lower-than-expected
profits and cut its outlook for 2013, blaming pricing pressures
in Europe. It reported a net profit of 92 million euros for the
period July-December 2012, partly because of
higher-than-expected costs at its troubled Brazilian business,
which was hit by fraud, tax and inventory issues forcing D.E
Master Blenders to restate past financial statements.
($1 = 0.7824 euros)
(Additional reporting by Gilbert Kreijger, Ivana Sekularac and
Simon Jessop; Editing by Mark Potter)