TPG in early talks to buy Coffee Day Global

Industry:    2019-08-28

Private equity firm TPG is in preliminary discussions on a possible acquisition of Coffee Day Global Ltd, which owns the Café Coffee Day (CCD) chain founded by the late VG Siddhartha, two people familiar with the development told ET.

However, talks are still at an exploratory stage and may not lead to a transaction. A TPG spokesperson declined to comment. Coffee Day Enterprises Ltd (CDEL) didn’t respond to queries. The promoter planned to restart talks with Coca-Cola on selling their stake in the chain, ET had reported on August 19.

Listed CDEL owns nearly 89.6% of Coffee Day Global, which houses a chain of about 1,750 stores across India, nearly 600 Value Express kiosks and 60,000 vending machines that dispense coffee in corporate workplaces and hotels under the brand. The coffee beans and powder are marketed through about 450 Fresh and Ground Coffee retail stores.

Coffee Day Global has debt of about Rs 1,100 crore.

CDEL also owns majority stakes in various group companies such as Coffee Day Global Ltd, Tanglin Development Ltd, Coffee Day Hotel and Resorts Pvt Ltd, Sical Logistics and Magnasoft Consulting among others.

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CDEL recently entered into a definitive agreement with Blackstone to sell Global Village Tech Park held by Tanglin Development for Rs 2,600-3,000 crore. This transaction is expected to be completed by September-end. Any likely deal on Café Coffee Day may not include the vending business.
“The proposed transaction is expected to value the coffee chain between Rs 3,500 and Rs 4,000 crore. The transaction will not include its vending machine business,” said one of the persons cited above. The late entrepreneur had been seeking a valuation of Rs 8,000 to 10,000 crore.
The group’s coffee business is expected to close the year ended March 2020 with sales of about Rs 2,250 crore, a senior executive has said. The business, which includes some coffee bean exports, had recorded revenue of Rs 1,777 crore and Rs 1,814 crore in FY18 and FY19, respectively, regulatory filings said.

The divestment is aimed at making the group debt free and also releasing some cash for the promoter’s family, sources said. Earlier this month, CDEL had announced that gross debt on its books was Rs 4,970 crore. In addition, there is some debt in the promoter’s holding company. The family owns about 54% of CDEL; 75.7% of the stake has been pledged.

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