7.5 Billion Reasons Why Krispy Kreme Just Bought Panera

Panera Bread

Panera Bread ($PNRA) knows how to run a restaurant chain better than most of their competitors. At a time when fewer Americans are going out to eat, Panera’s revenue keeps increasing. The company continuously opens locations around North America, while outfitting their 2,000-plus restaurants with new menu items and cost-cutting technology.

Panera also does incredibly well on the stock market. As companies like Chipotle ($CMG) and McDonald’s ($MCD) stumble and lose customers due to health scares and lack of quality ingredients, Panera still wins new customers with fresh ingredients and relatively low(ish) prices. This makes investors happy and optimistic about the company’s future, which contributed to a 94.38% increase over the last five years.

Despite the company’s success and potential for greatness in the future, Panera decided to sell themselves to an unlikely buyer: the owner of Krispy Kreme.

Wait…who bought Panera Bread?

JAB Holding Company, a Luxembourg-based private company, agreed today to buy Panera Bread for $7.5 billion. The company isn’t a stranger to the chain restaurant space, as they own Peet’s Coffee & Tea, Einstein Bros. Bagels (a Panera competitor), and yes, Krispy Kreme. They also own Keurig Green Mountain (the coffee pod company), Caribou Coffee, and Mighty Leaf Tea. They sure do love their coffee!

The wealthy Reimann family in German own and run JAB. The holding company is worth tens of billions of dollars, though the majority of the company’s ownership is controlled by descendants of Albert Reimann. As a holding company, JAB doesn’t actually make anything on their own. They simply buy and run companies to make them more successful.

Why did JAB buy Panera?

Despite Panera’s success, the company’s costs rose and profits shrank in recent years. Though shareholders have been overwhelmingly positive, the shrinking profits could effectively cause their stock to decrease in the future.

JAB’s purchase of Panera will make the restaurant chain a private company and no longer allow them to trade on the stock market. By doing this, JAB doesn’t really have to worry about Panera’s slowing profitability. The holding company is known for buying already-popular chains and making them even more profitable, while expanding their reach to other territories. They could essentially tweak Panera’s operations, see an uptick in profit, and bring the chain to new countries.

What do Panera investors get for this?

About $315 a share, if the deal goes through. Mind the fact that shareholders and regulators have to approve the buyout. If all goes well, however, JAB could own Panera by this fall.

Upon hearing the news of the buyout, investor interest in Panera rose exponentially. Panera’s stock is currently up 14.21% today, or $38.94 per share. This is because investors heard the $315 per share figure, wanted to get in under that price, and make guaranteed gains if/when the company is purchased. So, if you bought stock now at $312.94 per share and the acquisition goes through, you’ll make $2.06 in profit. If you bought under the current price, you’ll make even more.

Should I invest in Panera or JAB?

If you invest in Panera under the $315/share line and JAB successfully passes regulations to buy the company at that price, you’ll certainly make some gains. If you buy stock at the current price and the deal doesn’t go through, you can be sure that the current stock price will drop down to pre-acquisition levels, if not before.

Also, you can’t buy stock in JAB. It’s a privately held holding company, and all their assets are private companies. If this deal goes through, which it likely will, Panera will become private, too. The closest thing you could do is buy a few extra Krispy Kreme donuts and sell them on the secondary market, but no one has time for that!

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