illy attracts interest from JAB and Nestlé

Nestlé is considering acquiring illy. (Bloomberg pic)

TRIESTE: Italian coffee maker illycaffè SpA has attracted interest from suitors including JAB Holding Co. and Nestlé SA, but the owners have so far rebuffed approaches, according to people familiar with the matter.

JAB, which has built a coffee empire through a series of acquisitions, is interested in acquiring all of the Trieste-based coffee roaster, according to the people, who asked not to be named as the details aren’t public. Nestlé approached illy some months ago and was told the family was unwilling to sell for the time being, the people said.

“We have regular contacts with those companies, as with almost all other companies in the sector, to discuss non-competitive matters such as coffee and health, adaptation to climate change and market standards,” illy Chairman Andrea Illy said in a statement. “Every hypothesis of corporate agreements has been deemed inappropriate.”

illy, founded in 1933 by Francesco Illy and known for high-end espresso sold in silver-and-red cans, is led by the third generation of the same family. The business reported about 460 million euros (RM2.18 billion) in sales for 2016, up 5.3% from a year earlier, and operates in 140 countries.

The Italian company is one of the biggest independent coffee roasters left in a business consolidating around three big players: Nestlé, JAB, and Starbucks Corp.

JAB owns brands and retailers including Peet’s, Stumptown, and Caribou and paid about 1.5 billion pounds (RM8 billion) for sandwich-and-coffee chain Pret a Manger in May, people familiar with the matter have said. The investment company, backed by the billionaire Reimann family, is also raising about 5 billion euros (RM23.7 billion) from investors, people familiar said last month.

Nestlé is also expanding its coffee brands under Chief Executive Officer Mark Schneider as its Nespresso division wrestles with the loss of patent protection on its capsules. Nespresso lost share in Western Europe’s US$7.9 billion (RM37.4 billion) coffee-capsules market almost every year since 2009, according to Euromonitor. Smaller brands like L’Or Espresso and Lavazza have gained.

The Swiss food giant agreed in May to spend US$7.2 billion (RM34.1 billion) for the right to market Starbucks products. Nestlé will not get any physical assets in the deal, the third-largest purchase in its 152-year history. The company has also acquired a majority stake in Blue Bottle Coffee.

illy Group, the holding company that controls the coffee brand, is seeking a financial partner for its other activities by 2019 and may decide on an initial public offering of the chocolate and tea units, Chairman Riccardo Illy said in an interview with Italian daily La Repubblica July 16.