A Notable Restaurant Analyst On The Likelihood Of A Panera Takeover

Shares of Panera Bread Co PNRA spiked on Monday, following reports of the company exploring strategic alternatives, including a possible sale. Potential acquirers fall in two categories, namely strategic investors and other restaurants, Bernstein’s Sara H. Senatore said in a report.

Commenting on media reports of takeover interest, Senatore commented that the timing was “surprising,” since even before the recent surge in shares, move, Panera’s multiple had expanded and “a better entry point might have been had previously.”

Potential Acquirers

Senatore named strategic investors Restaurant Brands International Inc QSR and JAB as potential suitors, while naming Starbucks Corporation SBUX and McDonald's Corporation MCD as the other restaurants that may be interested.

“[W]e think a private strategic acquirer like JAB is more likely as a strategy to consolidate a category with emphasis on cost/synergies makes more sense than either a bolt on acquisition (for tech.) or a classic "refranchise and leverage" approach given PNRA's high AUVs and growth multiple,” the analyst wrote.

JAB's strategy of taking over coffee and bakery chains and the company’s ability to pay a premium are consistent with an acquisition of Panera. Senatore added that Restaurant Brands International had recently acquired Given QSR's recent acquisition of Popeyes Louisiana Kitchen Inc PLKI and making another purchase so soon “would be surprising.”

The case for Starbucks and McDonald's seemed less compelling, since there is “less strategic value in acquiring a relatively large, non-core asset for each company, especially given that both have invested significantly in proprietary tech (and therefore unlikely to acquire PNRA for that purpose),” the analyst pointed out.

Moreover, McDonald's was in the process of reducing its assets, having previously divested Partner Brands. Although Starbucks had acquired concepts in the past, the targets had been smaller than Panera, Senatore mentioned.

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