• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Consumer Discretionary

The Krispy Kreme Takeout Price Is Ridiculous

I'd have been much happier with a $27 a share.
By JONATHAN HELLER
May 10, 2016 | 02:17 PM EDT
Stocks quotes in this article: KKD

The universe of publicly-traded doughnut companies just got a lot smaller thanks to German private equity firm JAB Holding's acquisition of Krispy Kreme (KKD). I, for one, am not happy with the $1.35 billion, $21 per share deal.

Yesterday's headlines on the news heralded the 24% premium the transaction "handed" KKD shareholders relative to Friday's close, but it simply isn't enough. The fact that this was a $26 stock back in late 2013 may be meaningless as an argument. But what's not meaningless is that this was a company on the mend and the future was bright.

You know the Krispy Kreme story. It's a former cult stock that nearly imploded but managed to stage an incredible under-the-radar comeback. Back in the spotlight, KKD began to grow again, this time via international franchises. What was long thought of as a U.S. company ended its latest fiscal year with more than 73% of its 1,121 stores outside the U.S.

Now it will be in the hands of JAB, which is assembling quite the portfolio of brand names, including Kerurig Green Mountain, Peet's Coffee and Tea, and Caribou coffee. It sounds as though JAB may be trying to corner the coffee and doughnut market and I hope the Federal Trade Commission, which has made all sorts of trouble for the innocuous Staples/Office Depot merger, is paying attention. I don't mind paying more for paper and pencils, but protect my coffee and doughnuts!)

I always thought it would come to this for KKD. An entity would see the value offered by the brand name and make a play for it. It's a smart deal for JAB, which, along with a thriving international franchise business will also receive a nice real estate portfolio, which includes 37 owned stores (land and building) and another 38 (building only). JAB also gets a company with a very clean balance sheet, including $51 million in cash and just $12 million in debt.

I'd have been much happier with a $27-a-share takeout price, which represents 30x next year's consensus earnings estimates. Otherwise, I'd have been fine with no deal at all at this point. Longer term, I believe KKD would have continued along the path of success it has enjoyed since the comeback began in 2010. The wine simply needed more time to age.

This is not the first time, nor will it be the last, that I've been disappointed with a takeout bid for names in my portfolio. General Dynamics got Force Protection way too cheaply in 2011. Sumitomo got a great deal for Midas in 2012. Sellers usually always value their assets higher than buyers do.

But $21 for Krispy Kreme?

That's ridiculous.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Heller was long KKD.

TAGS: Investing | U.S. Equity | Consumer Discretionary | Stocks

More from Consumer Discretionary

Consumer Discretionary Stocks Are on a Roll as Consumer Staples Suddenly Stumble

Ed Ponsi
Jan 13, 2023 10:00 AM EST

The recent downturn in consumer staples stocks even as the broad market rises could be a positive sign for the economy going forward.

2 Beaten-Down Stocks Get Some Contrarian Love From Analysts

Bret Jensen
Jan 11, 2023 10:30 AM EST

A housing-related name and an RV manufacturer each receive a bit of positive attention.

Under Armour Needs More Than a New CEO to Boost Its Stock

Bruce Kamich
Dec 22, 2022 1:10 PM EST

When the marketplace ignores the arrival of a new CEO we should be careful.

Weber Flames Out as a Public Company While Rival Traeger Sputters

Jonathan Heller
Dec 14, 2022 11:00 AM EST

BDT Capital Partners' planned acquisition of the Weber shares it doesn't already own will end Weber's short stint as a publicly traded company.

V.F. Corp Replaces Its CEO, But the Stock Has Yet to Hit Bottom

Bruce Kamich
Dec 5, 2022 10:00 AM EST

Avoid the long side for now.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:27 PM EST REAL MONEY

    LIVE EVENT: Chris Versace and "Sarge" Guilfoyle Share Their Stock Market Insights

    This Monday, Jan. 30, at 12 p.m., our very own exp...
  • 11:48 AM EST REAL MONEY

    Watch Doug Kass on the Daily Rundown!

    In today's Action Alerts PLUS Daily Rundown, Doug ...
  • 11:03 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend On Real Money

    It's time to start using this power to build great...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login