Luigi Lavazza to acquire the coffee business of Mars Inc. to expand its sales in the U.S.

USA – Luigi Lavazza, an Italian manufacturer of coffee products, has agreed to acquire the coffee business of Mars Inc., including the Flavia and Klix systems to expand its sales in the U.S.

The company, according to FoodBev, is also broadening its operations in office coffee makers and vending machines with the acquisition, which was first reported by Bloomberg News.

The transaction values the business at about US$650 million, people with knowledge of the matter said earlier.

The Mars Drinks coffee business had sales of about US$350 million in 2017 and employs about 900 people, according to a statement from the companies.

The deal also includes coffee operations in Germany, the U.K., France, Canada and Japan.

The purchase comes as consumer-products companies, suffering as customers turn away from mass-market processed foods and drinks, increasingly see coffee as a key source of growth.

A race for scale in the business has led to Coca-Cola Co. buying U.K. chain Costa from Whitbread Plc and Nestle SA striking a deal to market Starbucks Corp. products from beans to capsules, after JAB Holding Co. snapped up Keurig Green Mountain, Peet’s, Stumptown and other brands.

“This acquisition fits perfectly within our international expansion strategy, the objective of strengthening key markets, as well as the pursuit of having an even closer relationship with end consumers,” said Antonio Baravalle, chief executive officer of Lavazza Group.

Lavazza obtained about US$463 million of financing for the purchase from a pool of banks including Intesa Sanpaolo SpA, UniCredit SpA and BNP Paribas SA’s Italian unit BNL, the people said.

Spokesmen for Intesa and UniCredit declined to comment, while a representative for BNL wasn’t immediately available.

Klix, introduced in 1973, is a brand of drink vending machines, and Flavia, launched in 1984, offers single-serve coffee makers for offices.

Lavazza’s latest deal follows last year’s acquisition of Italy’s Nims, which specializes in selling coffee capsules and machines door-to-door in Italy, and the purchase of Canadian organic coffee maker Kicking Horse Coffee, as well as French label Carte Noire.

The Italian company’s advisers were JPMorgan Chase & Co., Cleary Gottlieb Steen & Hamilton, PwC and Boston Consulting Group.

Mars was advised by BofA Merrill Lynch, Freshfields Bruckhaus Deringer LLP, KPMG LLP and Rabo Securities USA.