(Adds source on funding, details, background)
By Francesca Landini
MILAN, Oct 1 (Reuters) - Italian coffee maker Lavazza will swallow the coffee business of U.S. food giant Mars Inc to expand its global reach, in a deal worth around $650 million, including debt.
The two unlisted companies said on Monday that Lavazza had agreed to buy Mars Drinks, a business that includes Flavia and Klinx systems, two leading brands in the office coffee service (OCS) and vending machine segments.
The groups did not disclose the financial details, but a source close to the matter told Reuters the deal points to an enterprise value for Mars Drinks of around $650 million.
BNP Paribas, Intesa Sanpaolo and UniCredit provided a 400 million euro ($463 million) loan to the coffee maker for the deal, the source said.
"This acquisition strengthens Lavazza's position in the OCS and vending segments, which offer considerable opportunities for growth and development," said Antonio Baravalle, Lavazza CEO.
The Italian group was advised by J.P. Morgan, Cleary Gottlieb Steen & Hamilton, PwC and The Boston Consulting Group.
Mars Inc, which makes M&M's chocolate candies and Wrigley's gum, was advised by BofA Merrill Lynch, Freshfields Bruckhaus Deringer LLP, KPMG LLP and Rabo Securities USA.
The acquisition follows the purchase of Australia's Blue Pod Coffee announced by Lavazza last July and comes after a handful of deals the Italian group struck between 2015 and 2017 to boost its revenue above 2 billion euros ($2.3 billion).
Lavazza, founded in 1895 by Luigi Lavazza in the northern Italian city of Turin, is the market leader in Italy and is privately owned by the founding family.
The deal comes amid an acquisitions spree in the global coffee sector which has seen Coca-Cola acquiring coffee chain Costa from Britain's Whitbread for $5.1 billion in August and Nestle agreeing a $7 billion licensing deal for Starbucks's retail business earlier this year.
Under the agreement, which is expected to close by the end of this year, Lavazza will acquire Mars' coffee businesses in North America, Canada, Japan and in Europe, including its production plants in Britain and North America. ($1 = 0.8618 euros) (Editing by Stephen Jewkes and Adrian Croft)