De’ Longhi teams up with La Marzocco to boost coffee machine business

MILAN (Reuters) – Italian home appliance maker De’ Longhi has agreed to buy from its parent company a stake in high-end espresso machine manufacturer La Marzocco as it bets on coffee to pep up growth.

Milan-listed De’ Longhi will spend $374 million to acquire 41.2% of La Marzocco from De’ Longhi Industrial, its parent company, as well as from other minority shareholders, to create a hub with its existing Eversys coffee machine-making operation.

De’ Longhi will control around 61.4% of the new hub which will see the two companies remain independent, while reaping benefits in terms of savings and chances to cross sell products.

De’ Longhi, whose brand ambassador Hollywood actor Brad Pitt this year featured in the launch of two new coffee machines that also make cold brew, said the investment accelerated its strategy that sees coffee as a long-term growth engine.

It aims to provide for coffee drinkers both at home and in the professional catering sector.

Shares in De’ Longhi rose 2.7% by 0915 GMT, outperforming the wider Milan market which slipped 0.3%, after soaring as much as 7% in early trade to set a new high for the year.

“The strategic rationale is clear: to make of De Longhi a company more focused on the fast-growing coffee category and even more in the faster growing professional one,” Banca Akros analysts said a note.

The new hub is forecast to have an aggregate pro-forma turnover of around 372 million euros and an adjusted core profit of roughly 87 million euros, De’ Longhi said.

“The group, once the operation has been finalised, will still have ample financial resources and significant financial flexibility in view of future growth,” Chief Executive Fabio De’ Longhi said in a statement.

The deal, which is subject to rules regulating transactions among related parties, is expected to be finalised by the first quarter.

Lazard acted as sole adviser for De’ Longhi.

(Reporting by Elisa Anzolin; Editing by Valentina Za/Keith Weir)