Stephens Downgrades Krispy Kreme Following JAB Buyout

Stephens downgraded Krispy Kreme Doughnuts KKD to Equal-Weight from Overweight after the company said it agreed to be acquired by by JAB Beech Inc. for $21 a share, or about $1.35 billion in equity value.

"We like the valuation of this deal (over 16x '16 EBITDA), which is expected to close at some pointin the third quarter, and do not currently look for any competitive bids," analyst Will Slabaugh wrote in a note.

The analyst, who raised the target price to $21 from $20, said some of the notable investments of JAB include Peet's Coffee & Tea, Caribou Coffee Company, Einstein Noah Restaurant Group, and as of March 2016, Keurig Green Mountain.

"We believe this portfolio of brands makes the holding company a near-ideal candidate to take charge of the KKD brand, and see opportunities around executing broad-based operational improvements, easily adding to the beverage and food lineup, and profitably expanding the domestic and international storebase," Slabaugh noted.

Shares of Krispy Kreme surged 24.29 percent to $20.95.