SoftBank-backed hospitality chain Oyo and British private equity firm Apax Partners have joined the race to buy a significant stake in Café Coffee Day (CCD), according to two people close to the development.
Both Oyo and Apax have signed nondisclosure agreements (NDAs) with Coffee Day Enterprises (CDEL) and have initiated discussions to buy the group’s coffee business.
KKR, TPG Capital and Bain Capital have also signed similar agreements with CDEL and are in the race to buy CCD, ET had reported on November 15.
The first of the two people cited above said that all bids were being evaluated and the company’s board had started negotiations with at least two of the interested parties. “There have been five bids and all are being evaluated, but we will get some clarity only after a few days.
Oyo and Apax Partners and CDEL declined to comment.
The person cited above added that some of those submitting bids were only interested in buying the CCD brand, while others were also interested in some of the other functions of the existing operations.
Oyo is the only strategic investor — in a similar line of business — to have submitted a bid.
The company in August had launched a coffee chain – The French Press. SoftBank-backed Oyo is looking to expand in the café business for some time, and CCD’s already established outlets across 200 cities could be a major boost, said the second person aware of the proposals.
“The strategy could be to divide around 1,600 outlets into different categories. Those in prime locations could have one brand name, while those in the smaller towns could be re-branded ‘CCD Lite’ or something similar,” said the second executive.
This person said that dividing CCD outlets into different categories would also help with operational clarity, allowing the company to assess whether to shut down some of the outlets.
CCD operates through different models across cities. While some of the outlets are owned by the company, others are operated in rented premises, said the second person aware of the exercise.
“There are also cafes that run on a franchise model. A call will have to be taken by the buyer on monetising and operationalising all these different cafes,” he said.
Reportedly, Oyo’s presence in the cafe business is through a partnership with another coffee chain and through a franchise. Currently, there are two operational Oyo cafes in Delhi and Bengaluru, and the company was looking to start 12 other cafes in the coming months, according to local media reports.
Oyo also runs Adraq and O’Biryani – both kitchen brands – and could be looking to expand these as well. The company is looking to expand in the food segment and CCD could be an added advantage for the hospitality chain.
To be sure, the sale may not be an easy one and some of the major players have stayed away from CCD.
Prior to the bids, CDEL board had approached the Tata Group, which runs the Starbucks franchise in India, and the Jatia family, which operates McDonald’s chain in west and south India, but these parties were not interested in taking the talks forward, said people aware of the earlier rounds of talks.
The board had also reached out to ITC and Coca-Cola, which want the coffee business to be carved out into a separate entity before any potential deal. Neither ITC nor Coca-Cola — which runs Costa Coffee — has participated in the bidding.
The board is expected to speed up talks with the interested investors once the investigation report by former CBI official Ashok Kumar Malhotra is submitted.
Source: Economic Times