David Einhorn Looks Like A Genius In Einstein Deal

Einstein Bros. Bagels announced today that they agreed to be purchased by German investment group JAB Holding for $20.25 per share. The announcement immediately sent the stock soaring to 20.15 a gain of $6.76 or 50.49%. The deal was announced on National Coffee Day and will see JAB Holding paying $374 for the acquisition of Einstein Noah Restaurant Group, Inc. (NASDAQ:BAGL) which operates 855 stores in 42 states under the names Einstein Bros. Bagels, Noah’s New York Bagels and Manhattan Bagel.

The Colorado-based company had been enjoying gains all last week as newly installed CEO Frank Paci  said that he was looking into “strategic alternatives“. Investors who read between the lines of that statement and correctly gambled that he was looking to sell the group were rewarded handsomely today.

Paci, was the CEO of McAlister’s Dele from 2010 until he joined the Einstein Noah Restaurant Group, Inc. (NASDAQ:BAGL) on September 7th. Today’s announcement of the sale included the fact that Paci will receive a “transaction success bonus” worth 50% of his $630,000 annual salary.

David Einhorn’s stake in Einstein Noah Restaurant

David Einhorn’s Greenlight Capital holds 37.5% of outstanding shares in the company had enjoyed a majority position following a restructuring in 2003.

“JAB is an experienced firm that will lead Einstein Noah Restaurant Group into its next phase of growth,” said Einhorn in a statement earlier on Monday.

Einstein Noah

Frank Paci does his job


“No losers”

His sentiments were echoed today by Jerry Reisman, a mergers and acquisitions expert at New York law firm Reisman, Peirez, Reisman & Capobianco. “There are no losers in this deal – only winners, he said. “This is a fantastic premium (over last week’s stock price). It tells me there’s a lot of money in bagels.”

JAB has a controlling interest in coffee chains Caribou Coffee and Peet’s Coffee & Tea as well as coffee marketer DE Master Blenders (AMS:DE) (OTCMKTS:DEMBF) and could include Einstein’s bagel offerings at each chain if it felt the need or determined that there was a demand to be met.

It’s a logical move for JAB and Einstein did cut its teeth in the bean business when it opened as a coffee shop in 1993 before it acquired Manhattan Bagel in 1998 and Einstein and Noah’s in 2001. The company’s last earnings report came on April 1 when it declared revenues of $109.9 million, a rise year-over-year of 3.3% but also reported a drop in net income of 12.8%.

About the Author

Brendan Byrne
While studying economics, Brendan found himself comfortably falling down the rabbit hole of restaurant work, ultimately opening a consulting business and working as a private wine buyer. On a whim, he moved to China, and in his first week following a triumphant pub quiz victory, he found himself bleeding on the floor based on his arrogance. The same man who put him there offered him a job lecturing for the University of Wales in various sister universities throughout the Middle Kingdom. While primarily lecturing in descriptive and comparative statistics, Brendan simultaneously earned an Msc in Banking and International Finance from the University of Wales-Bangor. He's presently doing something he hates, respecting French people. Well, two, his wife and her mother in the lovely town of Antigua, Guatemala. To contact Brendan or give him an exclusive, please contact him at theflask@gmail.com