How The ECB Helped Buy Krispy Kreme

To legions of Green Mountain shorts, JAB Holdings may be one of the most hated names in finance: this is the the European investment fund that in late 2015 acquired the infamous coffee company which over the years had what may have been the biggest short interest of any stock. JAB Holdings is also the company which in May of this year announced that having purchased the coffee, it would also buy the donuts, when it unveiled a $1.35 billion deal to purchase Krispy Kreme Doughnuts, adding to its stable of famous brand ranging from Caribou Coffee to Jimmy Choo shoes, and even Durex condoms.

The reason we bring it up, is because also in May, two months after the announcement that the ECB would purchase corporate bonds in the open market, we speculated on what we thought at the time was Monetary Lunacy, namely that "The ECB Could End Up Funding Bayer's Purchase Of Monsanto." As Reuters noted "Bayer could receive financing from none other than the European Central Bank to help fund its takeover of the world's largest seed company, US-based Monsanto, according to the terms of the ECB's bond-buying program." And as we added, the purpose for which the bonds are issued "is not among the criteria set by the ECB, which will start buying corporate bonds on the market and directly from issuers next month. It now appears the "use of funds" may be M&A, and even LBOs."

While it remains to be seen if the ECB will end up funding one of the world's biggest M&A deals, we now know that the European Central Bank was instrumental in arranging JAB's acqusition of Krispy Kreme. Why? Because as Reuters reports, the ECB acquired a whopping 21% of the JAB Holdings €150 million bond issue that was used to fund, you guessed it, JAB's May purchase of Krispy Kreme. From Reuters:

Central banks bought 21% of JAB Holdings' 150m bond increase, a transaction that coincided with the first day of the European Central Bank's Corporate Sector Purchase Programme.


According to the distribution statistics seen by IFR, central banks and officials institutions were the second biggest buyers of the May 2023 tap via Deutsche Bank and HSBC.


Fund managers bought 56% of the trade. The Benelux was the biggest buying region at 29%, Germany and Austria bought 26%, the UK 21%, France 14%, Italy 5%, Spain 3% and others 2%. 


Official detail on what the ECB has purchased is expected on July 18 when national central banks publish a list of the bonds they hold.

The outcome: some very happy Krispy Kreme shareholders, and PE multiples of the peer group that have never been higher. And that is how central banks now actively participate in the M&A, and soon LBO, market.