Time to Sell the Donut Company

Published in CSP Daily News

Pernod Ricard sells Dunkin' Brands to Bain, Carlyle, Lee for $2.4 billion

BOSTON -- Bain Capital Partners, The Carlyle Group and Thomas H. Lee Partners have reached a definitive agreement to acquire Dunkin' Brands Inc. from Pernod Ricard SA for $2.425 billion in cash. The transaction is subject to standard regulatory approvals and is expected to close in first-quarter 2006.

Dunkin' Brands is a leading quick-service restaurant (QSR) franchisor that develops and franchises restaurants under the Dunkin' Donuts, Baskin-Robbins and Togo's brands. The existing Dunkin' Brands management team, led by CEO Jon L. Luther, will continue [image-nocss] in their current positions. The sponsors will invest equal amounts of equity in the company and the management team will become equity investors.

Todd Abbrecht, managing director of Thomas H. Lee Partners, said, This is a company with well over 10 years of growth ahead of it, both in the U.S. and in international markets, and this sponsor team has made a long-term commitment to realize that potential.

The sponsors noted that Dunkin' Brands has a powerful recipe for growth:

An established growth platform that supports further expansion in the United States and internationally; three premier QSR brands, including a leading player in the coffee segment; longstanding relationships with the company's strong, committed franchisee base; and an experienced management team with a track record of success.

Dunkin' Brands, headquartered in Canton, Mass., is a leading franchisor of QSRs with more than 12,000 Dunkin' Donuts and 5,600 Baskin-Robbins ice cream stores worldwide, as well as 350 Togo's sandwich shops in the United States.

The Dunkin' Brands business was acquired by Pernod Ricard as part of the takeover of Allied Domecq plc, which closed on July 26, 2005. Pernod Ricard's current strategy is to focus on its core wine and spirits business, it said.

Pernod Ricard said it will use the net proceeds (after tax and transaction costs) of around $1.7 billion from this sale to reduce its current debt levels. "The sale of Dunkin' Brands, within our expected timetable, is excellent news for Pernod Ricard as it allows us to accelerate the reduction of our debt. It follows the sale of our minority stake in Britvic as announced last Friday. It is also good news for Dunkin' Brands' future as they will be able to build on their existing solid platform and on the expertise of their new owners, said Patrick Ricard.

Following the acquisition of Allied Domecq, the Pernod Ricard portfolio comprises 15 key brands: Ricard, Ballantine's, Chivas Regal, Kahl aa, Malibu, Beefeater, Havana Club, Stolichnaya, Jameson, Martell, The Glenlivet, Jacob's Creek, Montana, Mumm and Perrier-Jou at.

Pernod Ricard's strategy is based on a decentralized organization made up of brands owner subsidiaries that define the overall development strategy for their brands and distribution subsidiaries that adapt these strategies to local markets requirements.

Boston-based Bain Capital is a global private investment firm that manages several pools of capital including private equity, venture capital, public equity and leveraged debt assets with more than $27 billion in assets under management. It has made private-equity investments and add-on acquisitions in more than 230 companies around the world, including QSR companies Domino's Pizza and Burger King, and retailers Toys R Us, Dollarama and Staples.

The Carlyle Group, New York, is a global private-equity firm with $35 billion under management. It invests in buyouts, venture capital, real estate and leveraged finance in Asia, Europe and North America, focusing on aerospace and defense, automotive and transportation, consumer and retail, energy and power, healthcare, industrial, technology and business services and telecommunications and media. The firm has invested $14.9 billion of equity in 439 transactions for a total purchase price of $51.9 billion. In the aggregate, Carlyle portfolio companies have more than $30 billion in revenue.

Thomas H. Lee Partners LP, Boston, is a private-equity firm focused on identifying and acquiring substantial ownership positions in growth companies. It currently manages approximately $12 billion of committed capital, including its most recent fund, the $6.1 billion Thomas H. Lee Equity Fund V. Notable transactions sponsored by the firm include Fisher Scientific International, General Nutrition Centers, Houghton Mifflin, Michael Foods, Nortek, ProSiebenSat.1, Rayovac, Simmons Co., Snapple Beverage, TransWestern Publishing, Warner Chilcott and Warner Music Group.

J.P. Morgan Securities Inc. acted as exclusive financial advisor and Debevoise & Plimpton LLP acted as legal advisor to Pernod Ricard on this transaction.