A private equity group unfamiliar to the stock market world claims to have made a bid to acquire struggling donut maker Krispy Kreme (NYSE:KKD). According to The Winston-Salem Journal, MGL Asset Management Group has offered $7.25 a share for the company, a premium of almost $2 a share over its closing price Monday.
The mystery surrounding MGL, its assets, ownership and ambitions have caused some to meet the proposal with skepticism. The company provides almost no information on its web site, and its spokesperson told the Journal that the bid was legit, but declined to elaborate.
The skepticism about this offer seems to stem from the wisdom and timing of such an acquisition. Although KKD just reported its first profitable quarter in over three years, overall, since selling in the $50 range before the carb craze, it has waffled ever since below the $10 mark, bottoming out at $2.50 a share just last November.
At a shareholder meeting recently, the CEO of Krispy Kreme reiterated the company's plans to build international business and increase the range of snack foods sold in convenience stores. Neither option, in my opinion, is likely to have a strong impact on the company's bottom line in the near future, if at all. One profitable quarter after three and a half years of losses in a company with a tired brand doesn't whet my appetite.
I wonder what drives MGL's interest? Perhaps they're looking at the hole picture, with a glazed look in their eyes.











Reader Comments (Page 1 of 2)
7-01-2008 @ 11:30AM
speculator said...
When Kreme first came to denver, there was a 60 min line for 18 hours a day for 6 months. Management ran the company into the groud. They are going to have a tuff time coming back form this bear market. I think the bear market will continue for some time . I don't think the SP 500 will hit 1400 again this year. In this Weekends Barron's Peter Schiff said "The US is in trouble"
www.theinvestingspeculator.com
7-01-2008 @ 1:05PM
Colin said...
KKD needs to get someone in there that can really help them leverage their brand. They have amazing brand loyalty but they really don't take advantage of it like they should.
7-01-2008 @ 1:37PM
Philip Block said...
Anyone who eats those sugar nuts is just asking for diabetes. It is almost imposible to buy a donut from them that is not covered with all kinds of junk containing sugar. You have to order a cake donut separately and they do not post them on their signs. And the donut itself has a blah taste (cheap dough). Probably that is why they cover it with sugar--so you can't taste the dough.
7-01-2008 @ 2:22PM
Willie said...
I believe that KKD is about dead, and that one or more of their executives 'leaked' a phoney story to jack-up interest & price of the stock so they can get out witth more than they would've.
7-01-2008 @ 2:28PM
J said...
Philip, you don't know much about diabetes! Eating KK donuts or any other sweet isn't what causes diabetes.
A Krispy Kreme donut and a cup of coffee now and again isn't going to kill you.
Seems pretty simple to me, if you don't like the taste of Krispy Kreme donuts then don't buy them. There are plenty of choices out there.
7-01-2008 @ 2:39PM
clwbchbabycakes said...
Want to get over your love of donuts? Work in a bakery for a week. I don't smell the sugar - I just smell the grease!! The oil they are fired in eats the soles off your shoes.....and you put them in your body? not me!!
7-01-2008 @ 3:26PM
michelle said...
philip: how many donuts do you typically eat in a day? most of us enjoy one donut maybe once a day and eat real food and drink plenty of water, too. Maybe you should rethink your diet.
7-01-2008 @ 3:39PM
DARLENE MARIA HILL said...
KRISPY KREME DONUTS ARE BY FAR THE BEST DONUTS ON THE PLANTET. ESPECIALLY WHEN THEY ARE HOT.
EVENTUALLY EVERYONE WHO STOPPED EATING THEM WILL JUST INVEST IN SOME CARB BUSTERS AND "MUNCH" "MUNCH" AWAY.
MAY BE A GOOD TIME TO BUY SOME STOCK...BECAUSE THAT KRISPY KREME CRAVING NEVER GOES AWAY.
DARLENE MARIA HILL
7-01-2008 @ 4:03PM
carole del monte said...
Yes, Krispy Kreme are the best. Dunkin' Donuts have become awful. Give us those trans-fats! Let us die a happy death.
7-01-2008 @ 4:51PM
Steve said...
I would not characterize Krispy Kreme as a "tired" brand, but more of a "disjointed" or "diluted" brand. Recall what happened:
1. They were a small profitable SE USA company with a magical and loyal following
2. They got greedy and expanded...over expanded way too fast without really testing their new business model.
3. They over extended their brand. Krispy Kreme donuts were hot and fresh. They melted in your moth. You'd drive 5-8 miles for one. They put their cold donuts in convenience stores, Targets, gas stations, hell anywhere.
4. They died.
The question remains, is Krispy Kreme salvageable without the wholesale distribution that they require to make their business model work. The retail and wholesale are at odds with each other. I don't think it is do-able.
7-01-2008 @ 4:53PM
Michael said...
Kracky Kreme...uhh...I mean, Krispy Kreme is the best donut in the world! I thought it was a bunch of hype until I tried one. My knees damn near buckled. I don't care if Krispy Kreme gets bought out by Satan himself, as lond as they don't change the recipe.
7-01-2008 @ 5:03PM
Velvetyice said...
I just went to Krispy Kreme for the first time a couple days ago, and I love them!! Sure, I'm not going to get the doughnuts all the time, maybe a dozen a month to share with my co-workers, but I will not stop going. For those who think these are deep fat fried in a vat of oil are wrong. I've been inside, they are placed in a huge baking oven, that's why there's no crunch after they've cooled down. Dunkin Donuts used to be my favorite, but nothing will ever beat Krispy Kreme. For those of you who are complaining about the health part of it, it never hurts to indulge a little, just don't take it too far!!
7-01-2008 @ 5:32PM
Bridget said...
After working at the Columbus, Georgia location as as Asst. GM, I could never eat another Krispy Kreme doughnut. In all fairness to Krispy Kreme that location was a franchise and hopefully not the way all Krispy Kremes do business. For you safety sake....my advise....avoid them. Things are seldom what they seem. Poor management, require employees to work sick around the products you will be eating. Just filthy practices in general.
7-01-2008 @ 5:40PM
Merrie said...
I live in Winston-Salem North Carolina. Everyone here eats KKD They rule the Donut world. Eat them while they are hot. Darlene is right in her comment. I really hate it for you people on the west coast who don't have a clue on how to make a real donut even if you have a KKD in your city you still can't make them like we can on Stratford Road in Winston-Salem N.C. The birth place of the first KKD.
7-01-2008 @ 5:53PM
Wolfster said...
Steve, I agree with you 100%. I'll just add one thing. You used to drive or walk by and see that sign on, and knew it meant fresh, hot donuts. Then some brilliant fool decided to leave the sign on all the time. They fooled me once, and then I was not a customer anymore.
7-01-2008 @ 6:07PM
Susan said...
My first encounter with a KKD was about 12 years ago when I moved from NY to Norfolk, VA. At first it was a novelty, and we would get them fresh for saturday breakfast. Eventually they just became a sickeningly sweet habit that we had to stop. After a while all you could taste was sugar and grease. I have to say their fillings are really good, but being back in NY, where we now have KKD, I can tell you the best donut you'll ever get comes from a bakery. No assembly-line donuts for me!
7-01-2008 @ 6:21PM
chris said...
Krispy Kreme. Yuk. As someone else said, grease and sugar. Absolutely no nutrition and a good way to get type 2 diabetes early. To build a whole company about a worthless product seems ridiculous, ---------I can't imagine anyone investing in it any more than Coca Cola........ Or Sees Candies, both of which are big WArren Buffett picks. I wouldn't eat or drink them either but invest? Maybe not such a bad idea. So much profit it throwing a little flour, sugar and yeast into hot grease. So many people in the world are into junk food, what can I say? And if you like them and can tolerate them, good for you!
7-01-2008 @ 7:13PM
Alfred Schrader said...
I could fix Krispy Kreme in one day.
And I love a good sticky soft doughnut.
If they are willing to pay me a consulting fee, I'll fix it for them.
Chef Alfreds
alfredschrader@aol.com
7-01-2008 @ 11:09PM
Mike said...
I don't mean to bust anyones dream, but I've got some real bads news for all you KK lovers.
KK is not going to make it ! Period. Their product is sub par and does not appeal to the mass market.
The coating is absolutely to sweet and because of that, it prohibits buyers from wanting to consume more then 1 or 2 per event.
Remember Winchell's' donuts? They had a better tasting product yet failed. Companies that putz around in this non-essential market never last very long. KK or the name KK will not be around in 2 yrs. But one thing is for that you loyal customers need to follow is, the exe's will always get big payday's & bonus' while the little guy over the donut machine gets booted.
Good luck fellow calories consumers.
7-02-2008 @ 8:37AM
tamika said...
KKD is still around, but they need to work hard to take the trans fats out of their donuts. They are fantastic when they are fresh (hot or cold). I used to eat 4 of those babies when they were hot. Now I gave them up since the trans fats are running through them.
The stock has been crappy for years but its still around and I just don't see this company bottoming out like some suggest.