JAB Holding A hands-off investment strategy pays off for Mittelstand's JAB

Unlike its German peers, the Reimann family has given remarkable freedom to the managers of its holding company JAB. The rewards have been huge, with the family fortune now growing exponentially.
Quelle: Bloomberg
Black, like JAB's bottom line.

No wealthy German family is both as ambitious and reclusive as the Reimanns, heirs to a multi-billion chemical fortune. Since 2012, their JAB holding company has invested €14 billion ($16.8 billion) in a global coffee and coffeehouse empire that rivals Nestlé and Starbucks, acquiring brands including Krispy Kreme, Douwe Egberts and Heurig. And the family has followed a strategy rare amongst its German Mittelstand peers – by taking a passive, hands-off approach that relies on professional managers rather than multi-generational familial meddling.

Their JAB holding, an investment vehicle sporting the initials of the founding patriarch, is run by three co-managers: veteran Reimann manager Peter Harf, ex-Mars executive Olivier Goudet and chairman Bart Becht. As well as chairing JAB, Mr. Becht is chairman of beauty products giant Coty and former CEO of pharmaceutical group Reckitt Benckiser, both at least partially owned by JAB. The holding is so successful that it is now essentially an investment fund and is on the hunt for outside capital to help fuel the company’s next stage of growth. “Our transactions are getting bigger and bigger, and we need more money,” Mr. Becht said in a Handelsblatt interview.

In 2012, the family handed discretionary power to the three co-managers to run JAB as they saw fit. Since then, the business has moved to Luxemburg for tax reasons, and expanded far beyond its stakes in Reckitt Benckiser and Coty. The holding company became an investment vehicle to raise external capital as well as looking after the Reimann wealth. Today, JAB manages some €80 billion, including state investment funds and wealthy families.

02 p14 JAB Holding in numbers-01

JAB’s imaginative approach was evident in a US takeover battle last year. US giant Proctor & Gamble wanted to dispose of its haircare brand Wella, triggering a tussle between JAB’s Coty and the Henkel retail group, owned by another wealthy German family. But where Henkel put in a standard offer for the brand, Coty offered to buy out no less than 43 of P&G’s brands, as well as shaping the deal in a particularly tax-efficient way. Ultimately, Coty won out, but the unorthodox deal pushed down the value of the company’s own share price. Mr. Becht says he is unconcerned: he takes the long view and is convinced the deal will pay off. “We do have an enviable amount of freedom, uniquely so among German family-owned firms,” he says.

The freedom given by the Reimann family to managers is highly unusual in the Mittelstand, the cadre of small- and mid-sized businesses that make up the lion’s share of the country’s economy. Such companies typically keep non-family executives on a tight leash. The Henkel family, for example, recently completed a complex restructuring of the business, in which the family will retain majority ownership. The Reimanns, by contrast, have been happy to pare down their direct Reckitt Benckiser holding to just 6 percent.

The Oetker family, another German business powerhouse, is both more cautious and more fractious: the group withdrew from the shipping business, selling off its freight carrier Hamburg Süd, while disputes persist within the family over business appointments. The Herz family, owners of the Tchibo retail chain, are far more hands-on, even participating in marketing decisions.

Quelle: Bloomberg
Hi! I'm Bart Becht.

This has meant managers have been free to undertake shrewd acquisitions in the last three decades, greatly increasing the family’s wealth. These included the acquisition of the Coty beauty business from Pfizer in 1992 and the merger of Benckiser with the British firm Reckitt & Coleman in 1999. As CEO of the merged business, Mr. Becht turned it into one of the world’s most profitable consumer goods suppliers, now worth almost €56 billion.

Six years ago, thwarted in an ambitious plan to take over the US cosmetics firm Avon, Mr. Becht and his colleagues devised an even more ambitious: to move into the fragmented world coffee market and make JAB a global player. In 2012, JAB bought up Douwe Egberts, followed by US coffeehouse chains like Krispy Kreme, and the capsule manufacturer Keurig. And the acquisitions continue to flow: last month, the company added the Malaysian coffee chain Old Town, bought for €300 million.

However, JAB has given up on a plan to establish a parallel holding of luxury goods makers, selling off its three flagship fashion brands, Bally, Jimmy Choo and Belstaff. Mr. Becht says the money raised will be spent in the coffee and beauty products sectors: “The world of coffee and tea is still not fully consolidated, and neither is the beauty business. You don’t have to be an Einstein to find acquisitions.”

The key to the successful Reimann family recipe may lie in shared risk and shared reward. In return for decision-making autonomy, the three JAB co-managers were expected to put the bulk of their personal fortune into the company. Mr. Becht says: “The family delegates responsibility but also makes sure that their interests and our interests are perfectly aligned. Our money is in this too –that reassures them that we won’t do anything stupid.” For the moment, it all seems to be paying off handsomely. In the last six months, the ownership share held by the three co-managers has doubled in value, to around €1.4 billion.

Christoph Kapalschinski covers consumer goods, textiles and food for Handelsblatt. To contact the author: [email protected]