Joh. A. Benckiser’s plan to buy D.E. Master Blenders 1753 NV (DE) already has analysts pondering the investment firm’s next move. One possibility: An asset swap with Beiersdorf AG (BEI)’s largest shareholder, the Herz family’s Maxingvest AG, which owns German coffee company Tchibo GmbH.
Under the scenario -- posited by Liberum Capital analyst Pablo Zuanic and Natixis analyst Pierre Tegner -- JAB would gain Tchibo, the world’s fifth-biggest coffee company, in exchange for perfume maker Coty Inc., (COTY:US) which could then be paired with Nivea-maker Beiersdorf. Such a deal would create global coffee and personal-care powerhouses and bring together two billionaire German families: The Reimanns, who control JAB, and the Herzes.
“Such an operation should allow these two German families to better focus their holding,” Tegner wrote in a note to clients. “The Reimann family would be clearly focused on coffee and the Herz family would be dedicated to beauty.”
To be sure, Tegner said the scenario had a “low probability,” as the rationale for merging Beiersdorf and Coty “is not very clear in our view.” And Bart Becht, who co-runs JAB, said in January that it was “very unlikely we would just focus on one category.” Still, JAB’s previous deals for Peet’s Coffee & Tea Inc. and Caribou Coffee Co. display its ambition to control a bigger swath of the $45 billion global coffee market.
“I think coffee will prove to be an interesting area for us,” Becht said in a January interview. “Even in Europe, it’s still a growing market.”
Coty doesn’t comment on market speculation, spokeswoman Cysette Burset said by e-mail. Elke Neujahr, a spokeswoman for the Reimann family, declined to comment. Officials for Beiersdorf and Maxingvest didn’t respond to calls made outside normal business hours.
Together, closely held Tchibo and Master Blenders would control 8.3 percent of the global coffee market and narrow the gap with leaders Nestle SA (NESN) and Mondelez International Inc., (MDLZ:US) according to Euromonitor data compiled by Bloomberg. Master Blenders Chief Executive Officer Jan Bennink has said he wants to unseat Mondelez as the world’s No. 2 coffee maker. In Western Europe, Master Blenders and Tchibo combined would have a 13.2 percent share, just behind No. 2 Mondelez’s 15.4 percent.
“These guys are smart,” Zuanic said. “They understand the value of scale. I am pushing the argument more now.”
Hamburg-based Tchibo, one of Germany’s oldest coffee companies, sells most of its coffee in supermarkets and in 820 of its own stores, yet it sees an increasing portion of its future sales in single-serve capsules, the fastest-growing part of the coffee category. Last year, it unveiled a new premium single-serve coffee maker in colors including hot-red and aubergine. Master Blenders makes L’OR capsules that are compatible with Nespresso single-serve machines, while its Senseo system competes with Nestle’s Nescafe Dolce Gusto.
Becht, along with JAB co-heads Peter Harf and Olivier Goudet, is assembling a coffee empire after JAB subsidiary Coty unsuccessfully attempted a takeover last year of door-to-door cosmetics seller Avon Products Inc. for more than $10 billion. Becht, also chairman of Coty, said then that the perfume maker would pursue other opportunities.
Coty filed for an IPO in June, seeking to raise as much as $700 million. It projected net revenue of more than $4.5 billion in fiscal 2012 in the filing. Coty, which holds perfume licenses for brands including Calvin Klein and Marc Jacobs, was founded in 1904 in Paris by Corsican-born Francois Coty. The New York- based company helped develop perfume into a mass product, with 36 million consumers two decades later.
With Coty’s IPO still pending, “is an asset swap between coffee and cosmetics the next step?” Tegner wrote in the note. Probably not, according to Eamonn Ferry, an analyst at Exane BNP Paribas in London, who described the likelihood as “very low.”
A swap would link the four adopted children of Albert Reimann, who each 23 percent of closely held JAB, with the offspring of Tchibo founder Max Herz. The Reimann family’s combined net worth is about $16 billion, according to data compiled by Bloomberg.
Through JAB and its subsidiaries, the Reimanns own 80 percent of Coty, along with Labelux Group GmbH, which manages luxury brands Bally, Belstaff and Jimmy Choo, and 10.5 percent of Slough, England-based Reckitt Benckiser Group Plc, (RB/) maker of Durex condoms and Nurofen painkillers.
The five Herz siblings inherited the fortune of Max Herz before breaking up over different views on the strategy for the family firm. Guenter, the oldest brother, who led the company after his father’s death in 1965, joined his sister Daniela. The remaining siblings, Michael and Wolfgang and Joachim, who died in 2008 in a motorboat accident, built the other axis of the clan with the patriarch’s wife, Ingeburg, and their holdings include a majority of Beiersdorf, as well as Tchibo.
Guenter and Daniela Herz were bought out of Tchibo in 2003 by the rest of their family for about 4 billion euros. The two invested in sporting-goods maker Puma SE in 2005 and reaped proceeds of more than 500 million euros two years later by selling their stake to French retailer PPR SA. (PP)
A tie-up between the two families is “definitely intriguing,” said Jonny Forsyth, an analyst at Mintel in London. “I can see why JAB would be interested in Tchibo. It’s always good to have a retail side to a coffee brand -- just look at Starbucks. They would be a real potential global power.”
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