Green Mountain Coffee Roasters (NASDAQ:GMCR) scooped up coffee brewing equipment maker Van Houtte for $890 million on Tuesday.
The deal nets a solid return for Littlejohn & Co., a private equity firm that acquired Montreal-based Van Houtte in 2007 for $600 million.
Green Mountain, which is headquartered in Waterbury, Vermont, said it expects the transaction to close by the end of the year and plans to pay for it through a combination of cash on hand and $1.35 billion of new debt financing.
“We believe that Van Houtte, in combination with our Green Mountain Coffee, Tully’s, Timothy’s and Diedrich’s brands, will contribute to our future success in Canada and throughout North America,” Green Mountain CEO Lawrence Blanford said in a statement.
The companies said Van Houtte CEO Gerard Geoffrion has agreed to stay on and lead the business in Canada after the deal closes.
“As a result of our long-term relationship as a Keurig licensee, we know there is a strong cultural and strategic fit between GMCR and Van Houtte,” Geoffrion said. “We believe the combination of our brands, employees and our respective geographic strengths makes for a stronger overall company and will enable us to continue to grow our presence in Canada.”
Green Mountain said it is mulling the divestiture of Van Houtte’s U.S. coffee services business and using any proceeds from a move to reduce the company’s outstanding debt.
Green Mountain sees the deal being neutral to slightly dilutive to earnings in the first 12 months and then adding to earnings thereafter.
Littlejohn put Van Houtte up for sale earlier this year after acquiring it in 2007 with a group of investors.
“The Van Houtte sale represents our second realization this year. The common theme between the two is our hands-on investment approach that focuses on working with strong management teams to help businesses deliver on their underlying potential," said Michael Klein, president of Littlejohn.
Green Mountain secured its debt financing for the deal through Bank of America Merrill Lynch (NYSE:BAC) and Suntrust Robinson Humphrey.