JAB’s big coffee merger leaves everyone else with the dregs

By Pune Media On Aug 27, 2025

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There are two risks in trying to ride the coat-tails of a big-name investor. One is that they do something that’s smart for their wider portfolio, but not for you. The other is that it turns out they’re mediocre at picking investments. In the case of JAB Holding, there is something of both.

JAB is the family office of Germany’s Reimann family, and the kingmaker behind a giant coffee merger announced on Monday between JDE Peet’s, in which it owns around 69 per cent, and Keurig Doctor Pepper, in which it owns just under 5 per cent, having trimmed what was once a much bigger stake. KDP is buying JDE Peet’s for €15.7bn in cash.

The deal has something to displease both sides. For shareholders in JDE Peet’s, it’s just a 20 per cent premium to Friday’s closing price. The shares had been rocketing under new boss Rafa Oliveira, whose turnaround strategy is just two months old. Shareholders might have preferred to give him more time. But JAB controls the company, so the wishes of outsiders are of little import.

For KDP, the deal has more appeal. JDE Peet’s comes fairly cheaply at 10 times forecast ebitda, if cost savings materialise. The company plans to split into two US-listed parts, coffee on one hand and other drinks, including Canada Dry and energy drink GHOST, on the other. Citigroup analysts estimate that, broken up, it could theoretically be worth one-quarter more than at Friday’s market close.

But it’s still a weak brew. The acquisition will leave KDP with lashings of debt to pay down. In an ideal world, it might be better off detaching its coffee business first, then merging it with the larger JDE Peet’s at a future date, as seller rather than buyer. Again, what shareholders might prefer is somewhat irrelevant, since KDP’s investors don’t get to vote on the deal.

The lure for JAB, meanwhile, is more obvious. The Reimanns and their co-investors will extract $12bn in cash by selling their stake to KDP, which they can then shovel into their new Warren-Buffett-a-like insurance strategy. That presumably outweighs the attraction of staying put while Oliveira tries to “reignite the amazing”, as proposed in his clunky strategic mantra.

Selling JDE Peet’s does little to burnish JAB’s middling investment record. The group has four listed companies in its portfolio, making up about half of its total investments: KDP, JDE Peet’s, perfumer Coty and doughnut maker Krispy Kreme. With the exception of KDP, anyone who bought in when JAB took those companies public has lost money. A dollar invested in Krispy Kreme’s 2021 market debut is now worth around 20 cents.

True, even the biggest-name investors make mistakes. Warren Buffett himself got egg on his face from his bet on the merger of Kraft and Heinz in 2015. But while those who copied him by piling into the merged company got scorched, anyone who invested alongside him through holding company Berkshire Hathaway did fine. The moral: invest in Buffett, not like him. In JAB’s case, for now it seems better to do neither.

john.foley@ft.com

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