How JAB Holding of the Reimann family is recovering from the pandemic

Dusseldorf After several lockdowns in the corona pandemic, people are buying more perfumes and cosmetics again. On the way to work, they treat themselves to a coffee or a sandwich: Companies such as the beauty company Coty or the snack chain Pret-A-Manger benefit from returning to the office. You were hit particularly hard by the crisis.

The Luxembourg-based JAB Holding owned by the Reimann family has a majority stake in both companies. The descendants of the Ludwigshafen chemical dynasty JA Benckiser bundle their investments there. JAB Chairman Peter Harf has built up an extensive network of companies since the 1980s. The focus is on consumer goods and services – mainly in the USA.

Shares in the coffee company JDE Peet’s (Jacobs, Senseo, Tassimo) belong to it as well as the beverage company Keurig Dr. Pepper or the US donut chain Krispy Kreme. JAB also entered the veterinary clinic business three years ago. A future market from which the Reimann family expects a lot.

The bottom line is that JAB’s investment portfolio posted net income of $ 3.7 billion in the first half of 2021. This is shown by the current annual financial statements. In the corona summer 2020 there had been high losses of 4.5 billion dollars. JAB Holding’s equity rose from around $ 23 billion at the turn of the year to a good $ 27 billion at the end of June. The Reimann family owns around 90 percent of JAB Holding. The rest are held by twelve partners, including Peter Harf.

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The partners of the JAB not only manage the assets of the Reimanns. In total, they manage more than $ 50 billion. The capital comes from various co-investors who are investing in the JAB holdings in parallel. The JAB Consumer Partners fund (formerly Consumer Fund) has currently invested more than $ 15 billion in family offices and institutional investors and distributed over $ 9 billion again.

This fund is crucial for JAB, says the rating agency S&P. “It gives us a lot more clout,” emphasized JAB Vice Chairman Joachim Creus in the Handelsblatt in May. “This enables us to make important acquisitions and build large companies – without the Reimann family having to become over-indebted.”

Animal health as a new growth area

According to the Financial Times, JAB is in the process of launching a new $ 5 billion fund. The capital is to flow into the animal care industry of the future. “Animal health has been one of our best investments ever in recent years. Today a dog is part of the family like a child, ”says Creus. JAB will continue to invest heavily in veterinary clinics. The Belgian lawyer is the designated successor to Peter Harf. The man in his mid-forties has just been promoted to Managing Partner. When Creus will replace the 75-year-old chief strategist of the JAB is open.

Buying, building up, merging and going public – that is Harf’s strategy. He therefore always attaches great importance to financial leeway in order to be able to make acquisitions at any time. At the end of June, JAB’s liquidity was a lush 6.4 billion dollars. Last but not least, the entry into US veterinary clinics such as Compassion First and NVA accumulated a mountain of debt of 7.7 billion dollars as of the end of June.

Moody’s and S&P criticize the debt ratio of over 20 percent. The situation eased somewhat when JAB issued two bonds worth more than $ 1 billion in May and July. These are due in 2031 and 2051. In addition, the donut chain Krispy Kreme went public in early July. The IPO grossed around $ 500 million. These should primarily flow into debt reduction.

However, the donut chain’s IPO had a bitter aftertaste: JAB had actually hoped to raise $ 650 million. Krispy Kreme posted significant losses in fiscal 2020 – despite record sales of $ 1.1 billion. Today the share is trading a seventh below the issue price. JAB still holds around 80 percent of Krispy Kreme.

Peter Harf

The chairman of the JAB has been managing the Reimann family’s assets for decades.

(Photo: dpa)

In the middle of the pandemic, Harf had already dared to go public with the merged coffee company JDE Peet’s. It brought in more than two billion euros in May 2020. But sales and profits come on the spot. The shares traded in Amsterdam have lost almost a quarter of their value since it went public. “We are only interested in the long-term development,” said Creus at the time. “We sell 4,500 cups of coffee every second. People will always drink coffee. It is practically a legal drug. “

Coty is working his way out of the crisis valley

The business of Coty, the long-term problem child of JAB, is developing more positively. S&P recently raised its forecast for the beauty company from negative to positive. Above all, the debt reduction is appreciated. Coty has now sold almost 70 percent of the Wella hairdressing business to financial investor KKR. S&P leaves the credit rating at B-.

The new Coty boss Sue Nabi is realigning the troubled group, reducing excess capacities. Coty’s only German perfume factory in Cologne with 300 employees also closes. The ex-L’Oréal manager relies on e-commerce and skin care. Products from influencer sisters Kim Kardashian and Kylie Jenner are intended to open up new target groups.

The strategy is bearing fruit. The meager share price has more than doubled since Nabis took office in September 2020. This will benefit JAB Holding, which holds 60.6 percent of Coty. The value of the stake rose within six months by one billion to 4.2 billion dollars. “Coty should continue to benefit from higher sales and successful implementation of the transformation plan,” S&P expects.

Sue Youcef Nabi

The new Coty boss wants to get the brands of the beauty group going again: “In 2022 we want to reap the fruits of our renovation work.”

(Photo: Coty)

The veterinary clinic division is developing even better. At $ 4.8 billion, it has long outstripped the Coty stake in terms of value. However, more than half of JAB’s assets are in the coffee and cold drinks division, the investment was last worth $ 18.4 billion. This is followed by the Pret Panera snack chains with a valuation of five billion dollars.

In 2017, JAB swallowed the US bakery chain Panera Bread and its debts for 7.5 billion dollars. A year later, the majority of the British sandwich chain Pret-A-Manger was bought, which was valued at the equivalent of two billion dollars. The lockdown was hard on the chains. Pret-A-Manger’s sales slumped more than half to around £ 300 million in 2020. The operating loss was similarly high at £ 256 million.

Now JAB and Pret founder Sinclair Beecham are injecting £ 100 million. The chain had previously received £ 185 million as a rescue. Now the business should grow again internationally. And the stock market plans of Pret Panera, which Harf announced in 2019, seem to be more acute, according to the “Financial Times”.

More: “The Reimanns’ secret of success is unity”

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