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Panera Acquiring Au Bon Pain Under Aggressive New Expansion Initiative

Panera Bread has reached an agreement to acquire Au Bon Pain Holding Co., the Boston-based bakery-cafe chain of 304 units which was started by the founders of Panera Bread.

The deal marks a new strategy for St. Louis-based Panera, which itself was acquired three months ago and is transitioning to new leadership. It is the first step in Panera’s “initiative to intensify growth in new real estate channels, including hospitals, universities,” airports and urban locations among others, the company said.

Terms of the transaction, which is expected to close during the fourth quarter, were not disclosed.

Ron Shaich, Panera’s founder, chairman and CEO, and his late partner, Louis Kane, created Au Bon Pain in 1981. “With the acquisition we are announcing today, we are bringing Au Bon Pain and Panera together again,” Shaich said.

Simultaneous to the acquisition announcement, Shaich also announced he was stepping down as CEO Jan. 1 while remaining as the firm’s chairman.

“This is the right time for me to step down as CEO while still staying involved in the business as chairman,” he said. “I returned in 2011 because our growth was slowing and we needed to reposition Panera as a better competitive alternative with expanded growth opportunities. And I’m happy to say we’ve done just that.”

Panera has been one of the best-performing publicly traded restaurant stocks of the last 20 years, delivering a total shareholder return up 86-fold from July 18, 1997, to July 18, 2017, when it was sold to JAB Holding for $315/share, giving the deal a valuation of about $7.1 billion.

The sale to JAB was a boon to institutional investors. According to analysts, the premium paid for Panera Bread was recognition of its previous investments to improve efficiencies and grow margins.

“Panera Bread Co. benefited from a formal take-out offer, and also benefited from driving above industry sales growth due to its digital experience roll-out,” Waddell & Reed Advisors Funds reported this past September.

Panera has been a leader in digital sales, executing about 1.3 million digital transactions per week, representing about 28% of its sales, Shaich said.

“Our omni-channel approach leads the industry, with delivery now available in more than 50% of the system and catering sales growing well over double-digits yearly,” he said.

Blaine Hurst, Panera’s president and the architect of the digital strategy is taking over as CEO.

“The past seven years have given me the opportunity to learn from an industry icon,” Hurst said. “With exciting new initiatives underway to better serve our customers and improve their dining experience, I believe our opportunity is even brighter.”

As of September, Panera operated 2,050 bakery-cafes in 46 states and in Ontario, Canada.

In the acquisition of Au Bon Pain, Panera is being advised by Skadden, Arps, Slate, Meagher & Flom LLP. Au Bon Pain is being advised by North Point Advisors LLC and Kirkland & Ellis LLP.

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