Panera Bread CEO and founder Ron Shaich says the decision to sell the bakery cafe to German conglomerate JAB for $7.5 billion is “bittersweet.”
“I wasn’t really looking for this in any way,” Shaich told Fortune in an interview following the announcement. “To be honest, we have been hugely successful.”
Panera’s success is why privately held investment firm JAB is paying so handsomely to acquire the chain, which has about 2,000 locations and generates more than $5 billion in annual systemwide sales. The deal will mean Panera will be controlled by the same company that also owns Keurig Green Mountain, Krispy Kreme Doughnuts, and Peet’s Coffee & Tea, all brands that have been acquired in the past five years.
Shaich founded Panera back in 1981 to become an early player in the fast-growing fast-casual restaurant segment. He took the company public in 1999 and since then, the stock has outperformed the restaunt industry and wider S&P 500 index. That’s partly because of savvy restaurant expansion, as well as investments in making Panera’s food healthier at a time when consumers say they want to eat more clean foods. Investments in digital operations have also helped.
But Panera is selling to JAB because, as Shaich explains it, both like to think long term. “They are thinking about centuries, not decades,” he said. “They are very committed to long term decision making. And very committed to a hands-off approach.” Shaich believes that Panera’s main competitive advantage has been focusing on the bigger picture.
If Panera is so forward-looking—and has been so successful in terms of generating consistent sales and stock market growth—why sell? Shaich seems to have lost patience with all the headaches that come with running a public company. “I spend about 20% of my time explaining what I do and what I’m about to do,” he said. “I think being private, for Panera, doesn’t give us anything other than it frees us up.” The deal is also personally lucrative to Shaich, as he owns a little over 5% of the company’s Class A shares.
Shaich seems particularly excited to no longer have to deal with activist investors, which have been known to invade the restaurant industry to clamor for change. Panera found itself in the crosshairs twice: in 2007 with Shamrock Activist Value Fund LP and in 2015 with Luxor Capital. The latter battle led Panera to issue $500 million in new debt to buyback shares to appease Luxor.
“What they give us is a safe harbor and protection to do what we do and do the work to satisfy the guest,” Shaich explained. He added that he intends to remain actively involved in the management of the brand “as long as I’m having fun and feeling like I’m making a difference. I love the work.”
It is too early to say what JAB plans to do with Panera once the deal closes. JAB has been consolidating mostly around the breakfast portion of the day via the acquisitions of Krispy Kreme, Keurig, Caribou Coffee and Einstein Noah. Breakfast has reportedly been Panera’s fastest-growing portion of the day over the past year, so adding Panera might make sense to establish a tier of breakfast options (Krispy Kreme at the low end, Einstein Noah in the middle, and Panera as the most premium player).
“On the other hand, breakfast remains a relatively small portion of PNRA’s sales (we estimate 15-20%),” wrote BMO Capital Markets in a research note that was published before the deal was confirmed. It had speculated that rival Dunkin Brands (DNKN) might have been a better fit as it is more highly exposed to breakfast. That deal didn’t happen today (it could down the road), and in fact, shareholders sent Dunkin’s stock down a bit on Wednesday on the Panera news.
When Fortune asked Shaich if Panera’s brand would potentially integrate with any of the other assets that JAB owns, he didn’t seem to think that was likely. “Panera will be a separate company with its own direction,” he explained. But having said that, Shaich added, “If there are resources that we can use to help our strategic plan, we are going to look for them. But no one is going to force us to do anything.”