Bloomberg News

Caribou Trades Above Benckiser Offer for Third Day

December 21, 2012

Caribou Coffee Co. (CBOU:US) traded above Joh. A. Benckiser Group’s $16-a-share offer price for the third straight day as shareholders agitated for a higher bid.

Caribou is undervalued at JAB’s offer price and may attract higher bids, according to Accretive Capital Partners LLC and Gamco Investors Inc. (GBL:US) The Minneapolis-based coffee-shop company is worth $30 to $35 a share, Richard Fearon, Accretive’s founder and managing partner, said in a letter yesterday to Caribou’s board.

“We at Accretive Capital Partners find ourselves utterly dismayed by the price you have accepted,” Fearon said. “It would be in shareholders’ best interests to determine if other major strategic buyers -- such as Starbucks, Green Mountain (GMCR:US), Dunkin’ Brands, Krispy Kreme -- had any interest in acquiring Caribou Coffee.”

Caribou fell 0.5 percent to $16.19 at the close in New York after rising to $16.27 yesterday. The shares (CBOU:US) have gained 16 percent this year.

Benckiser paid (PEET:US) about $941.2 million, or 21.6 times earnings before interest, tax, depreciation and amortization, for Peet’s Coffee & Tea Inc. in October, while Starbucks Corp. (SBUX:US)’s pending offer for Teavana Holdings Inc. (TEA:US) in November values the Atlanta- based tea seller at 19 times Ebitda, according to data compiled by Bloomberg.

Benckiser’s $340 million purchase price offer for Caribou values the coffee seller at 11.2 times Ebitda, the data show.

Caribou ‘Undervalued’

“We think it’s statistically undervalued even at $16,” Mario Gabelli, head of Gamco, said in an interview on Dec. 19. Caribou’s Ebitda will increase about 15 percent to $35 million in 2013 from this year, Gabelli said.

Lisa Alcorn, a spokeswoman for Caribou Coffee, and Tom Johnson, a spokesman for JAB, declined to comment.

Gamco disclosed in a Dec. 19 filing that it raised its stake in Caribou Coffee to 6.8 percent from 5.7 percent. It disclosed its 5.7 percent stake on Dec. 18, the day after Benckiser announced its plans to buy Caribou. Accretive owns more than 850,000 shares of Caribou, according to Fearon’s letter.

Caribou, which has about 610 stores, has said it’s targeting 10 percent to 12 percent unit growth in 2013. It also has started opening kiosk locations in Supervalu Inc. (SVU:US)’s Jewel- Osco grocery stores. Starbucks has more than 11,100 stores in the U.S., while Peet’s has about 197.

The Caribou deal’s $5.2 million termination fee, if the the company abandons the transaction before Jan. 15, is smaller than the $30 million fee for the Peet’s takeover, according to company filings.

Still, Peet’s may be worth more to Benckiser because it has a bigger grocery business and a more premium brand, said Jason Moser, an Alexandria, Virginia-based analyst at the Motley Fool. Emeryville, California-based Peet’s “demands more of a premium,” he said.

Peet’s grocery, food service and home-delivery businesses generated $157.6 million in revenue last year, while Caribou’s grocery segment had revenue of $71.5 million.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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