Joh. A. Benckiser is close to announcing a formal offer to buy D.E Master Blenders 1753 NV, the coffee and tea company spun off by Sara Lee Corp., in a bid that may value the company at 7.6 billion euros ($10 billion), people familiar with the matter said.
JAB, the investment firm run by Bart Becht, plans to pay about 12.75 euros a share, said the people, who declined to be identified because the matter is confidential. The agreement will be announced within a week, the people said.
The investment arm of the German billionaire Reimann family has secured financing from Citigroup Inc., Bank of America Corp., Rabobank Groep and Morgan Stanley, according to the people. The two parties said last month that they were in talks that could lead to a deal, causing a 25 percent gain in Master Blenders share price on March 28.
“They arranged financing quite quickly,” said Robert Jan Vos, an analyst at ABM Amro. “The market now assumes that there is close to 100 percent chance that the bid will be successful. I still think it’s a knockout bid.”
D.E Master Blenders shares rose as much as 3.1 percent on the news, and then traded up 0.7 percent at 12.20 euros at 2:41 p.m. in Amsterdam.
Master Blenders spokesman Michiel Quarles van Ufford declined to comment, saying that he was not in a position to comment on JAB’s plans. Spokesmen at Citigroup, Bank of America and Morgan Stanley couldn’t be immediately reached for comment, and officials at JAB and Rabobank declined to comment.
Buying Master Blenders will add to JAB’s coffee investments, which it bolstered in the past year by purchasing Peet’s Coffee & Tea Inc. for about $1 billion and Caribou Coffee Co. for $340 million. A takeover would pit the Benckiser family against Nestle SA (NESN), the Swiss maker of Nespresso, the biggest single-service brand in the $45 billion global coffee business.
The offer valued Master Blenders at a multiple of 29 times earnings, Pierre Tegner, an analyst at Natixis in Paris, estimated last month. That’s less than the 40 times earnings that JAB paid for Emeryville, California-based Peet’s and the 42 times it offered in December for Minneapolis-based Caribou.
Becht is assembling a coffee empire after JAB subsidiary Coty Inc. unsuccessfully attempted a takeover last year of door- to-door cosmetics seller Avon Products Inc. (AVP:US) for more than $10 billion. Becht, also chairman of Coty, said then that the perfume maker would pursue other opportunities.
Master Blenders makes L’OR capsules that are compatible with Nespresso machines. Its Senseo system competes with Nestle’s Nescafe Dolce Gusto portioned coffee brand.
Since being spun off from Sara Lee, Master Blenders has restated earnings because of accounting irregularities in Brazil and has reported sales that missed estimates. Chief Executive Officer Michiel Herkemij left at the end of last year because of a difference of opinion, leaving Chairman Jan Bennink in charge.
Other parties may eventually participate in the bid, one person familiar with the matter said. In JAB’s takeover of Peet’s Coffee last year, BDT Capital Partners LLC, the Chicago- based firm run by former Goldman Sachs Group Inc. vice chairman Byron Trott, also took a minority stake.
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