On Wednesday, Panera said it reached a merger agreement in which JAB has agreed to buy the restaurant chain for $315 per share in cash—a transaction that was approved by the board and represents a premium of about 30% to the 30-day trading volume before speculation of a potential transaction.
With the deal, JAB is scooping up a consistent restaurant chain that has posted steady comparable-restaurant sales and rising revenue at a time when many restaurant chains are hurting due to high labor costs and weak traffic trends. Panera generates about $2.8 billion annually in revenue and operates a little over 2,000 locations. And while the deal is expensive for JAB as Panera commanded a premium on the market, executives at the bakery-cafe chain have argued that the business has been valued so richly because it performs so consistently.
Here’s four of the most important takeaways from the deal.
JAB is a major deal maker
JAB has emerged as a major consolidator of food and beverage makers, scooping up deals at a faster pace than the other two major consolidators: Kraft Heinz (khc) and Anheuser Busch InBev (bud). While Kraft Heinz and AB InBev have been inking bigger deals of late focusing on packaged foods and beverage alcohol, JAB’s deal-making has been smaller, at a faster clip, and tends to focus on coffee brands and foods that pair perfectly with a java jolt.
Panera’s acquisition will unite it with Keurig Green Mountain ($13.9 billion), Krispy Kreme Doughnuts ($1.35 billion), as well as Peet’s Coffee & Tea (bought for $974 million in 2012) and Caribou Coffee Company (acquired for $340 million, also in 2012). JAB also owns Espresso House, the largest branded coffee shop chain in Scandinavia, Baresso Coffee—the first and largest branded coffee shop chain in Denmark—and Netherlands-based Douwe Egberts.
Panera has been dominating the restaurant industry
“Panera has been the singular best performing restaurant stock over the past 20 years,” said founder and CEO Ron Shaich in a recent interview with Fortune. “Twice Starbucks, four times Chipotle and five times Buffalo Wild Wings.”
Shaich has claimed that Panera has found success because of the company’s industry leading focus on tilting food toward healthier fare and using “clean” ingredients and reformulating the menu to remove aspartame, high fructose corn syrup, saccharin and dozens of other ingredients. The company’s management believes that these moves have given the chain a competitive advantage as consumers say they want to eat more healthy foods.
Panera also benefits from being a leader in the “fast casual” world—which has also been dominated Chipotle Mexican Grill (cmg) until that chain ran into some food-safety woes that greatly pressured sales. Fast casual chains sell food that consumers perceive as having higher quality than fast-food restaurants and are also priced a few dollars above those bargain-focused chains, but doesn’t require table service like Olive Garden, Applebee’s and other casual-dining chains. Fast casual chains have gobbled up traffic and sales at a consistent clip.
Expect more investments in digital
Panera previously promised that system-wide digital sales could reach $1 billion annually by this year. It got there by introducing Panera 2.0 a few years ago, an initiative that was meant to improve the experience at Panera’s cafes by adding technology and operational improvements to help keep up with high transaction volumes. Essentially, Panera 2.0 is the chain’s major investments in tech, which includes digital ordering and kiosks that customers can use to place orders.
JAB will almost certainly want to invest more in the digital experience at a time when restaurant chains are increasingly focusing on this trend to book more orders from time-strapped shoppers. Starbucks (sbux) and Domino’s (dpz) are often deemed the industry leaders in this realm. JAB may want to spend more to catch up—especially to ensure that orders are booked and processed quickly during the peak morning and lunch rushes.
Restaurant industry may see more takeovers
There might be more tie-ups in the restaurant industry as the sector finds itself sorting between the winners and the losers. On the winning side, Restaurant Brands, the owner of Burger King and Tim Hortons, recently paid $1.8 billion in cash to acquire fried chicken chain Popeyes Louisiana Kitchen. Popeyes has reported sturdy sales in the U.S. and abroad and has grown to become the world’s second-largest quick-service chicken concept based on number of units, trailing only Yum Brands’ (yum) KFC.
Conversely, casual-dining chain Ruby Tuesday (rt) is weighing a sale as it struggles to compete. And after pressure from an activist investor, Bob Evans ended up splitting the troubled casual-dining restaurant chain from the faster growing and more profitable packaged foods business. Applebee’s owner Dinequity (din) may also find itself mulling its options after recently ousting its CEO. More deals—for both restaurant winners and losers—are almost certainly to be inked in the coming months.