JDE Peet’s IPO: Global Coffee Company to Offer Stock
A JDE Peet’s Coffee IPO is coming to the European market. News of the offering brought high investor demand. It’s possible the offering of Peet’s stock could be the biggest of the year, looking to raise $2.5 billion.
Peet’s Coffee is the second-largest packaged distributor in the world. But is it a good investment? Here’s what we know…
JDE Peet’s Coffee IPO: The Business
Alfred Peet founded Peet’s Coffee in 1966. The specialty coffee roaster and retailer is based in the San Francisco Bay Area. It’s now owned by JAB Holding Company, a privately held German company focusing on long-term investments. JAB also owns Panera Bread (Nasdaq: PNRA) and Krispy Kreme (NYSE: KKD).
Peet’s operates coffee bars, offers subscription services and sells equipment. The company follows four pillars to achieve excellence:
- Selectively sourced
- Roasted by hand
- Delivered fresh
- Brewed to perfection
To learn more about the company’s process and personalized subscriptions, you can check out Peet’s website.
But the Peet’s Coffee IPO is coming during a time of uncertainty. The coronavirus shook global markets, and things are still settling. So why is JDE Peet’s going public now?
JDE Peet’s Coffee Goes Public During Coronavirus Pandemic
The coronavirus had a large global impact. Markets plummeted. Volatility soared. And the IPO market nearly halted. But during this time, there have been a few successful public debuts from companies. Some Corona IPOs are coming from companies that have benefitted from new social norms. The largest is stay-at-home quarantine. And that’s where Peet’s Coffee comes into play.
Companies like Starbucks (Nasdaq: SBUX) took a big hit from coronavirus’ social regulations. That’s because they rely on people going to its coffee bars. But Peet’s Coffee has an advantage because most of its products are designed for at-home use.
JDE Peet’s chief executive Casey Keller said,
“We see a reasonable amount of stability in the financial markets right now. We see the coffee and tea market as a relatively resilient category in different types of economic conditions and even during this current crisis.”
In fact, 79% of JDE Peet’s 2019 revenue came from coffee sold for at-home consumption. And if you’re an investor interested in the Peet’s Coffee IPO, company finances are important to look at.
JDE Peet’s Financial Situation
In the company’s filing, financial data for the years 2017 to 2019 is available. From 2017, Peet’s Coffee saw a gradual increase in operating profit. It went from about $783 million in 2017 to just over $1.1 billion in 2019. And in the first quarter of 2020, operating profit totaled $281 million compared to $220 million the year before.
However, Peet’s profit for the period doesn’t have the same positive trend. In 2017, profit for the period was $478 million. In 2018, it was $734 million. But in 2019, profit was down to about $650 million. According to the financial data, the main reason is income tax expense. Income tax expense for 2019 was almost five times as much as the year before.
On top of that, JDE Peet’s also has outstanding debt. Under reasons for the company’s initial public offering, it states…
“The Company believes that the Offer will strengthen its financial position by enabling it to repay part of its outstanding debt. The Admission further provides the Company with access to capital markets, which it may use to support and develop further growth of the Group and to finance mergers and acquisitions, as they become available.”
Since 2012, JDE Peet’s owner, JAB, made more than ten acquisitions. That includes the merger of U.S. coffee brand Jacobs Douwe Egberts Coffee back in December 2019. So, it’s not a surprise JDE Peet’s would use some of the IPO profits to continue that growth.
But when looking to invest in a company, you need to look at the market. Global sales for tea and coffee grew from $90.7 billion in 2007 to $129 billion in 2019. JDE Peet’s is looking to expand in this market. It will focus on the U.S. household market and retail expansion in China as an emerging market.
Now, let’s look at what Peet’s Coffee is offering investors.
Peet’s Coffee IPO: The Details
The company plans to sell 23.3 million new shares to raise about $775 million. Pricing ranges from about $33 to $36. Peet’s gave J.P. Morgan the option to buy an additional 3.5 million shares. Current major shareholders Acorn Holdings and Mondelez will both offer up to 25.8 million additional shares.
Overall, if all shares are sold, the company could raise up to $2.5 billion. All shares will represent 17% of JDE Peet’s total share count. And the offering gives a market value of up to $17.7 billion.
But the big question about the JDE Peet’s IPO is…
When Will Peet’s Coffee IPO?
Books opened on Tuesday, May 26, 2020. The offer period will end after a week on June 2, 2020. And JDE Peet’s stock is expected to start trading Wednesday, June 3, 2020.
Peet’s Coffee stock will trade on the Euronext Amsterdam under the symbol “JDEP.” Trading will start at 09:00 CET (Central European Time).
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JDE Peet’s Coffee has operated for over 50 years. Today, the company continues to grow. It showed its market of coffee remains strong even in an economic downturn. And that could make the Peet’s Coffee IPO a good investment opportunity.