The private equity owner of Pret A Manger is set to sell the UK-based sandwich shop chain for £1.5bn to JAB Holdings, the private investment group taking on beverage giant Nestlé by rapidly acquiring companies linked to the coffee market.
The transaction is set to be unveiled as soon as Tuesday barring any complications, according to three people with direct knowledge of the situation. They added that the £1.5bn purchase price was inclusive of debt.
The sale will mark a lucrative exit for Pret's owners, Bridgepoint, the UK private equity group, which initially paid £364 million, including debt, to buy the business a decade ago.
The London-based firm had been exploring a listing of Pret but decided that it could get a more favourable price through a sale. The deal values Pret at about 15 times earnings before interest and tax, the people said.
Trade buyers and private equity players, such as Carlyle and BC Partners, had expressed interest in the business.
Founded in 1986 as a single shop in London, Pret has expanded to approximately 500 stores across the world and become a staple for workers who are seeking quick but affordable options for breakfast and lunch, in particular.
Pret recorded sales of £776 million in 2016, an increase of 15 per cent from the prior year, according to its latest financial results, reported in April 2017. Its ebitda rose 11 per cent to £93.2 million. The company said at the time its total store count stood at 444 and that it aimed to reach 500 within a year.
The chain has its largest footprint outside Europe in the US, where it has expanded to operate 92 shops but where it also faces question marks about its ability to grow further.
Pret has recently also been struggling with recruiting staff in the UK following the vote to leave the European Union. Just one in 50 job applicants in London, for instance, comes from the UK, raising questions over its future staffing following Brexit.
Luxembourg-based JAB is an investment vehicle that manages the fortune of Germany’s reclusive Reimann family.
Run and operated by a trio of veteran consumer industry executives, JAB has been building up a presence in coffee-related companies and is now the number two challenger to Switzerland’s Nestlé for market share.
The coffee category is one of the fastest-growing consumer businesses, particularly in the US, the world’s largest coffee market.
A takeover of Pret would be the second major deal for JAB in 2018. In January, it took analysts by surprise by announcing a deal to take control of Dr Pepper Snapple, the fifth-largest fizzy drink maker in the world, for $18.7bn in cash, and combine it with its Keurig Green Mountain business.
In recent years, JAB has predominantly focused on the coffee business. It bought Keurig, which is best known for its coffee machines and single-serve pods, as well as a number of retailers including Peet’s Coffee, Einstein Bros. Bagels, Krispy Kreme and Panera Bread. JAB also owns upmarket brands such as Stumptown and Intelligentsia Coffee. Its coffee portfolio includes a majority stake in Jacobs Douwe Egberts, which distributes a range of European brands, including Senseo and Tassimo.
JAB’s expansion throughout the sector has prompted Nestlé to respond with its own dealmaking.
The Swiss group said it would pay $7.15 billion to sell Starbucks coffee products outside of its café chain. Last year, it paid $700 million for a majority stake in upmarket coffee retailer Blue Bottle Coffee.
The Pret A Manger deal is expected to be completed during the summer. Bridgepoint declined to comment. JAB did not immediately respond to a request for comment. – Copyright The Financial Times Limited 2018
