When discussing spinoffs, analysts often toss in a comment about how the new slimmed and focused companies will be more attractive acquisition targets. After all, who doesn’t like the idea of a relatively quick exit with a nice premium? Sometimes they are right though and the most recent one to be acquired is Sara Lee spin DE Master Blenders 1753 (OTC:DEMBF). In case you don’t recall, the Sara Lee name was dropped last year when the company split into a meats & food service focused business – Hillshire Brands Companies (HSH) – and an international coffee & tea business, DE Master Blenders 1753.
The coffee company had some accounting issues earlier on in Brazil and performance was relatively flat in 2012. The stock popped though when word of a potential tie up with an investor group led by Joh A Benckiser (JAB) leaked at the end of March. The price thrown about was €12.75, but a board supported €12.50 cash offer came in shortly thereafter. JAB, a privately held holding company, already owned ~15% of the company’s shares and the acquisition of DE Master Blenders represents a further leap into the coffee & tea space by the firm which had previously snatched up both Peet’s Coffee and Caribou Coffee. Its earlier acquisitions focused more on the retail space, but now JAB can boast about owning the world’s third largest coffee producer. JAB isn’t purely beverage focused though as the company also holds stakes in or owns Reckitt Benckiser, beauty product company Coty and the Labelux Group (Jimmy Choo).
In the end, this represents a win for investors in the spin and is now in the hands of merger arb players.
Disclosure: Author holds no position in any stock mentioned.