By Ben Dummett
The European investment firm behind Peet's Coffee, Krispy Kreme and Keurig Dr Pepper said it priced the initial public offering of its coffee business at the upper part of its targeted price range, valuing it at EUR15.6 billion ($17.3 billion) in one of the world's biggest IPOs so far this year.
Backed by JAB Holding, JDE Peet's B.V. bet that the resilience of coffee demand during economic downturns would attract investors despite slumping IPO markets in Europe and the U.S. amid the coronavirus pandemic.
The wager has paid off. JDE Peet's is selling around 71.4 million shares, or about 14% of the coffee and tea business, at EUR31.50 a share for a total of EUR2.25 billion. This is toward the high end of the range of EUR30 to EUR32.25 a share.
That makes it Europe's largest IPO and the second-largest globally this year after Beijing-Shanghai High-Speed Railway Corp.'s $4.4 billion offering in early January, according to Dealogic data. The pricing comes less than a week after bankers officially launched marketing for the deal, underscoring the strength of investor demand.
The stock started trading Friday on the Euronext Amsterdam, jumping 11% at the outset to EUR35, underscoring investor appetite for the offering
The IPO could offer some hope for other companies that can show that the pandemic hasn't derailed their operations. Warner Music Group is eyeing an offering that could value the music company at between $11.7 billion and $13.3 billion, a bet that the music industry will prosper even during times of market upheaval.
JDE Peet's sells coffee across the U.S., Europe and parts of Asia through both cafes and grocery stores. They include Peet's Coffee, Jacobs Coffee, Douwe Egberts, Senseo and Tassimo. About 80% of its coffee is sold for at-home consumption, a market that has held up so far during lockdowns.
The Netherlands-based company grew year-over-year revenue by 3% in the first quarter ended March 31 to EUR1.68 billion. It expects like-for-like sales, which exclude the impact of acquisitions, to gain in the first half of 2020, according to its IPO filing.
JDE Peet's faces stiff competition from Nestlé SA, the world's biggest coffee retailer in the at-home-use market. Last year, Nestlé commanded almost 25% of the coffee market based on retail sales, followed by JDE Peet's which has just over 10% of the market, according to Euromonitor data.
At the same time, JDE Peet's smaller business as an operator of a network of coffee shops represents a potential risk for IPO investors depending on how quickly people are able to return to their normal lives. The company said revenue from its out-of-home business was down after it was forced to temporarily close its retail stores due to the pandemic.
"Disruptions related to widespread public health concerns, including the Covid-19 pandemic, could materially adversely impact the group's business, financial condition or results of operations," the company warned in its prospectus.
JDE Peet's is selling about 22.2 million new shares as part of the IPO for about EUR700 million. It will use that money to pay down debt. The rest of the money raised will go to existing shareholders, including Oreo cookies owner Mondelez International Inc., for selling down their positions.
JAB Holding, which bought an additional EUR300 million worth of stock in the IPO, remains the company's controlling shareholder.
Write to Ben Dummett at email@example.com