JAB Holding to acquire Einstein Noah

by Eric Schroeder
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LAKEWOOD, COLO. — JAB Holding Co. has agreed to acquire Einstein Noah Restaurant Group, Inc. for $20.25 per share in cash, for a total equity value of about $374 million. Einstein Noah is a leader in the fast-casual segment of the restaurant industry operating under the Einstein Bros. Bagels, Noah’s New York Bagels and Manhattan Bagel brands.

The agreement, which has been unanimously approved by Einstein Noah Restaurant Group’s directors, represents a premium of approximately 47% over Einstein Noah Restaurant Group’s 30-day average trading price.

“Einstein Noah Restaurant Group has a great collection of brands that reflect JAB’s long-term investment philosophy, and we see significant opportunity for growth,” said Olivier Goudet, partner and chief executive officer of JAB. “We welcome Einstein Noah Restaurant Group and its employees to the JAB family, and we are excited to be a part of the next chapter of its growth.”

JAB Holding is no stranger to the food and beverage industry. The company also has a majority stake in Peet’s Coffee & Tea, Inc., Caribou Coffee Co. and D.E Master Blenders 1753 N.V.

Greenlight Capital, Einstein Noah Restaurant Group’s largest stockholder with more than 35% of the outstanding common shares, has agreed to tender its shares in support of the transaction. Following the successful completion of the tender offer, JAB will acquire all remaining shares not tendered in the offer through a second-step merger at the same price as in the tender offer.

“Greenlight supports this transaction, which we believe delivers significant value to Einstein Noah Restaurant Group stockholders and is a win-win for all parties,” said David Einhorn, founder and president of Greenlight Capital. “For more than a decade, we have worked closely with the Einstein Noah Restaurant Group to execute a turnaround plan, reducing debt and expanding its store footprint. JAB is an experienced firm that will lead Einstein Noah Restaurant Group into its next phase of growth.”

At the close of the transaction, Einstein Noah Restaurant Group will maintain its headquarters in Lakewood and will continue to operate as a standalone business in the JAB portfolio, consistent with the firm’s investment practice. Michael Tattersfield, c.e.o. of Caribou Coffee Company, Inc., another JAB portfolio company, will serve as chairman of the board.

“I am looking forward to working with the Einstein Noah Restaurant Group’s talented executive team,” Mr. Tattersfield said. “Having worked in and around the food industry for many years, I have long admired the Einstein Noah Restaurant Group’s strong market position and growth potential, and I am looking forward to contributing to the company’s continued success.”

Einstein’s management team includes Frank G. Paci, who was named president and c.e.o. in early September. Mr. Paci has been charged with leading a brand revitalization program that includes: growing same store sales through traffic and check; improving guest satisfaction through a “Plan to Win” initiative and product quality enhancements; increasing capital spending to grow units and refresh base units; continuing to pursue catering growth toward 20% or more per annum; optimizing marketing spend; driving lunch traffic through product and promotional efforts; and implementing costs savings as a result of cost rationalization.

Founded in 1993, Einstein Noah is the largest owner/operator, franchisor and licensor of bagel specialty restaurants in the United States. In fiscal 2013, the company had net income of $14,565,000, equal to 84c per share on the common stock, on total revenues of $434,481,000. As of July 1, Einstein Noah had 857 restaurants in 42 states and in the District of Columbia. The fast-casual restaurant chain specializes in foods for breakfast, lunch and afternoon snacks in a bakery-cafe atmosphere with a neighborhood emphasis. Product offerings include fresh-baked bagels and other bakery items baked on-site, made-to-order sandwiches on a variety of bagels, bread or wraps, gourmet soups and salads, assorted pastries, premium coffees, specialty beverages and an assortment of snacks.

The transaction remains subject to various conditions, including a minimum tender of at least a majority of Einstein Noah Restaurant Group’s outstanding shares on a fully diluted basis, the expiration or termination of the waiting periods under applicable competition laws, and other customary conditions. The tender offer is not subject to a financing condition.

In addition to JAB Holding, BDT Capital Partners, a Chicago-based merchant bank that provides long-term private capital solutions to closely held companies, will be a minority investor in Einstein Noah.
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