The Benckiser group agreed to buy Caribou Coffee Co Inc CBOU.O for about $340 million in a deal that would boost the German investment company's position as the No. 2 U.S. purveyor of premium coffee, but still well behind Starbucks Corp (SBUX.O).
Joh. A. Benckiser Group (JAB), the investment vehicle of the Reimann family, offered $16 per share to take Caribou private, a premium of about 30 percent to the stock's Friday close of $12.32.
Adding Caribou's 610 outlets in 22 U.S. states to Benckiser's Peet's Coffee and Tea outlets would give the group a little more than 800 U.S. outlets. Starbucks has about 11,000.
Caribou shares jumped to $16.64 on the Nasdaq, suggesting some investors anticipate a higher offer, before easing back to $16.01 by early afternoon, still just above the offer price.
"We don't think they are paying anywhere near enough. The price should be closer to $30-$35," said Richard Fearon, managing director of Hedge fund Accretive Capital Partners LLC, whose largest shareholding is in Caribou.
"At $16 per share (Caribou) is being stolen for less than 0.9 times sales and 10.5 times earnings before interest, taxes, depreciation and amortization," Fearon said.
Peet's, in contrast, was taken private at 2.4 times sales and 21 times EBITDA, Fearon said.
Craig Hallum analyst Matt Bendixen, who has a $19 target price on the stock, said he believed Caribou could get a better offer. "The buyer has got a pretty good value here on the purchase price," he said.
However, intrinsic valuation on Thomson Reuters StarMine suggested that Caribou's stock should be trading around $8.22, compared with Friday's close of $12.32, indicating stronger growth than analysts had anticipated.
StarMine's models take into account analyst estimates for growth, usually over five years, and then model the typical growth trajectory of companies over a longer period of time.
"Investing in a growing premium coffee space is the overarching theme here, and Caribou is a very cheap way to do that," Stephens Inc analyst Will Slabaugh told Reuters.
The Reimann fortune comes from the Benckiser chemicals company, founded in 1823, one of the predecessor companies of London-based Reckitt Benckiser Group Plc (RB.L).
The family also controls fashion group Coty COTY.UL, which it unsuccessfully tried to merge with Avon Products Inc (AVP.N) in a $10.7 billion deal earlier this year, and owns Labelux Group, manager of luxury brands Bally, Belstaff and Jimmy Choo.
Benckiser bought Peet's Coffee & Tea Inc PEETC.UL for about $1 billion in July. It further bulked up its coffee business in October when it raised its stake in Amsterdam-listed D.E Master Blenders 1753 DEMB.AS, the Douwe Egberts coffee business spun out of Sara Lee, to just over 15 percent.
Caribou Coffee, founded in 1992, operates its own outlets and licenses its coffee to Green Mountain Coffee Roasters Inc's GMCR.O for its Keurig single-cup coffee brewers.
Caribou reported a 3.5 percent rise in comparable-store sales in the third quarter, helping it post a better-than-expected results.
Chicago-based BDT Capital Partners, founded by Byron Trott, a long-time confidant of billionaire investor Warren Buffett, will participate in the Caribou deal as a minority investor and adviser.
Once the deal is completed, Caribou will continue to be operated as an independent company run by its current management and will remain based in Minneapolis, Minnesota.
Caribou Coffee was advised in the deal by Moelis & Co LLC.
(Additional reporting by Arpita Mukherjee in Bangalore and Herb Lash in New York; Editing by Sriraj Kalluvila, Don Sebastian and Ted Kerr)