Genius? Einstein Bros. shares up 50% on deal – quote by Jerry Reisman
September 29, 2014
By Gary Strauss
Investors in the parent company of Einstein Bros. Bagels are looking smart Monday, with shares jumping $6.77 to $20.16 after the company said it would be acquired by German investment group JAB Holding for $20.25 a share.
The $374 million buyout of Einstein Noah Restaurant Group (BAGL) includes 855 stores in 42 states operating under Einstein Bros. Bagels, Noah’s New York Bagels and Manhattan Bagel.
Shares were up sharply last week after the Colorado-based company said it was pursuing strategic alternatives under newly installed CEO Frank Paci.
Under terms of the deal, Paci – who arrived Sept. 7 after serving as CEO of McAlister’s Deli since 2010 – will get a “transaction success bonus” worth 50% of his $630,000 annual salary, according to corporate filings.
Among the biggest winners: hedge fund manager David Einhorn, whose Greenlight Capital currently holds about 37.5% of outstanding shares. Greenlight had owned a majority stake in the company following a 2003 restructuring. Einhorn, in a statement, supported the deal. “JAB is an experienced firm that will lead Einstein Noah Restaurant Group into its next phase of growth.”
“There are no losers in this deal – only winners,” says Jerry Reisman, a mergers and acquisitions expert at New York law firm Reisman, Peirez, Reisman & Capobianco. “This is a fantastic premium (over last week’s stock price). It tells me there’s a lot of money in bagels.”
JAB, which has controlling stakes in coffee chains Caribou Coffee and Peet’s Coffee & Tea as well as coffee marketer D.E. Master Blenders, could parlay expanded menu offerings at both bagel and beverage chains, Reisman says.
Einstein got its start as a coffee shop in 1993. It acquired Manhattan Bagel in 1998 and Einstein and Noah’s in 2001. In its latest quarter ended April 1, revenue rose 3.3% to $109.9 million, while net income fell 12.8%.