Lavazza Acquiring Mars Drinks / Flavia / Alterra Coffee

Italian coffee maker Lavazza will swallow the coffee business of U.S. food giant Mars Inc to expand its global reach, in a deal worth around $650 million, including debt.

The two unlisted companies said on Monday that Lavazza had agreed to buy Mars Drinks, a business that includes Flavia and Klinx systems, two leading brands in the office coffee service (OCS) and vending machine segments.

CoffeeASAP does not expect major changes as of now to the business model, equipment, or beverages with this acquisition.  Lavazza has pointed out some key things about the Mars Drinks strategy that are consistent with their own company goals.  Having tried the Lavazza espresso along with several other Italian espresso's in head to head comparisons, CoffeeASAP's favorite by far was the Lavazza!  So, should there be changes to the drinks; we believe it could be even better!

Lavazza Mars Drinks

“This acquisition fits perfectly within our international expansion strategy, the objective of strengthening key markets, as well as the pursuit of having an even closer relationship with end consumers,” said Antonio Baravalle, chief executive officer of the Lavazza Group. “Today’s transaction with Mars, Inc. is consistent with a common vision and shared values between two prominent family-owned companies who have a strong focus on delivering quality products with uncompromising commitment to our employees and associates, with a long-term vision.”

The acquisition is expected to strengthen Lavazza’s presence in office coffee service and vending segments, he added. Established in 1895, the Italian roaster operates in more than 90 countries and generated revenues of €2 billion ($2.3 billion) in 2017.

“Mars Drinks has been an important part of our business for many years, and while it’s always hard to say goodbye to great brands, valued associates and friends, we believe now is the right time for a change," said Grant F. Reid, president and c.e.o. of Mars, Inc. “We are confident this decision will better enable long-term success for the Drinks business with Lavazza — a company that shares our values and has a dedicated focus on beverages — and will allow the business and its associates to continue to thrive.”

Mars Drinks generated sales of approximately $350 million in 2017 and has a workforce of approximately 900 employees. T
he groups did not disclose the financial details, but a source close to the matter told Reuters the deal points to an enterprise value for Mars Drinks of around $650 million.

Under the agreement, which is expected to close by the end of 2018, Lavazza will acquire Mars’ coffee businesses in North America, Canada, Japan and in Europe, including its production plants in Britain and North America.

BNP Paribas, Intesa Sanpaolo and UniCredit provided a 400 million euro ($463 million) loan to the coffee maker for the deal, the source said.

“This acquisition strengthens Lavazza’s position in the OCS and vending segments, which offer considerable opportunities for growth and development,” said Antonio Baravalle, Lavazza CEO.

The Italian group was advised by J.P. Morgan, Cleary Gottlieb Steen & Hamilton, PwC and The Boston Consulting Group.

Mars Inc, which makes M&M’s chocolate candies and Wrigley’s gum, was advised by BofA Merrill Lynch, Freshfields Bruckhaus Deringer LLP, KPMG LLP and Rabo Securities USA.

The acquisition follows the purchase of Australia’s Blue Pod Coffee announced by Lavazza last July and comes after a handful of deals the Italian group struck between 2015 and 2017 to boost its revenue above 2 billion euros ($2.3 billion).

Lavazza, founded in 1895 by Luigi Lavazza in the northern Italian city of Turin, is the market leader in Italy and is privately owned by the founding family.

The deal comes amid an acquisitions spree in the global coffee sector which has seen Coca-Cola (KO.N) acquiring coffee chain Costa from Britain’s Whitbread (WTB.L) for $5.1 billion in August and Nestle (NESN.S) agreeing a $7 billion licensing deal for Starbucks’s (SBUX.O) retail business earlier this year.

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