JDE Peet’s $2.5 Billion IPO Order Book Covered Within Hours

(Bloomberg) -- JDE Peet’s, the coffee business being listed in Amsterdam by JAB Holdings NV, gathered enough investor demand for its 2.25 billion euros ($2.5 billion) initial public offering within three hours of bookbuilding, a signal that Europe’s stalled IPO market is opening up again.

The order books are covered on the total offer size, according to deal terms seen by Bloomberg. The company and some of its shareholders will offer stock at 30 euros to 32.35 euros, JDE Peet’s said in a statement Tuesday. At the planned offer size and price, the listing will be the largest in Europe since manufacturer Knorr-Bremse AG raised 3.85 billion euros in October 2018, according to data compiled by Bloomberg.

JDE Peet’s is selling 23.3 million shares, with shareholders Mondelez International Inc. and Acorn Holdings, a company owned by JAB and other investors, offloading as many as 25.8 million shares each. The offering also includes an over-allotment option of about 337.5 million euros that would take the total offer size to almost 2.6 billion euros.

Indicated demand exceeds the size of the offering, the terms show, with the float riding a resurgence in European equity markets even as the coronavirus pandemic weighs on the global economy. The deal implies a market capitalization of 14.9 billion euros to 16 billion euros for the company.

The float is a sign of an earlier-than-anticipated recovery in the IPO market, which was expected to remain virtually shut for several months at least due to the collapse in the global economy brought on by the pandemic and the resulting lockdowns. The listing of JDE Peet’s is set to be worth more than the total IPO proceeds of $1.8 billion across 24 listings this year, according to the data.

The European IPO market could open up more rapidly than expected, if JDE Peet’s proves to be a success, said Gavin Launder, a fund manager at Legal & General Investment Management. While niche beneficiaries of the lockdown such as video-conferencing company Pexip Holding AS have managed to list, JDE Peet’s offering is a true test of the IPO market, he said.

Judging by the speed at which the book was covered, the IPO seems to be faring well, Launder said. The listing is attractive because JDE Peet’s enjoys steady growth as a pure-play coffee business, while offering a high payout ratio, he said.

After announcing the IPO last week, JDE Peet’s said coffee demand has been resilient during the downturn, with consumption moving to people’s homes from offices and cafes during the lockdown. BNP Paribas SA, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are the global coordinators on the listing.

The IPO is moving on a quicker timeline than usual for a sale of this size. JDE Peet’s, which announced its intention to list last week, is beginning a bookbuilding period Tuesday that will last one week rather than the customary two. The final price and number of shares to be sold will be set next week, on June 3, when trading will begin on Euronext Amsterdam.

The pandemic has upended the traditional IPO process, with shorter subscription periods, more cornerstone investors and virtual meetings to pitch the offerings to investors. The company has already secured investments totaling 761 million euros at the offer price from Soros Fund Management LLC, Fidelity Management and Research and JAB, according to the statement. The sale is a private placement to institutional investors, with no offering for retail investors.

JDE Peet’s, which plans to use the IPO proceeds to repay debt, will gain a stock to use as currency for further acquisitions to challenge Nestle SA and Starbucks Corp. in the industry. Still, the company’s target market capitalization is only a sliver of Nestle’s, which is value at about 307 billion Swiss francs ($317 billion).

JAB has spent billions of dollars to build a coffee empire through deals that included the merger of Jacobs Douwe Egberts Group with U.S. coffee retailer Peet’s, and its brands also include Senseo, Tassimo, Stumptown and Intelligentsia.

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