Caffè Nero quashes EG Group takeover bid after refinancing debt

Caffè Nero was hard hit by the pandemic but has steadily regained pace as trading restrictions have eased | Photo credit: Caffè Nero Group

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Caffè Nero has ended a takeover bid by petrol station forecourt operator EG Group after successfully completing £330m ($453m) debt refinancing. According to a report in the Financial Times, Caffè Nero has secured a six-year loan package from HSBC, Santander and Carlyle Group, alongside and undrawn credit facility of £85m that could be used to facilitate further international expansion.
 
Caffè Nero rejected a bid by EG Group to take control of the company in November 2020 and entered into a company voluntary arrangement (CVA) deal in order to renegotiate rents and restructure debt accumulated during the pandemic.
 
EG Group, however, continued its efforts to take over the business, purchasing around £140m of the coffee chain’s debt from Swiss private equity firm Partners Group and later using its position to launch a legal challenge against Caffè Nero’s CVA;
 
That bid was dismissed by the High Court in September 2021, which rejected allegations of ‘material irregularity and unfair prejudice', by one of Caffe Nero’s landlords.
 
EG Group, led by brothers Mohsin and Zuber Issa, has continued to increase its stake in the UK branded coffee chain market over the last 12 months, acquiring food-to-go and coffee chain Leon for around £100m ($137m) in April 2021 and snapping up bakery and café chain, Cooplands, in October.
 
In December 2021, EG Group said its foodservice brands had been the ‘stand out performer’ across its UK business, which includes licensed branches of Starbucks, KFC, Cinnabon and Greggs.
 
Caffè Nero was hard hit by the pandemic but has steadily regained pace as trading restrictions have eased. In October 2021, the coffee chain’s founder and CEO, Gerry Ford, said the business was “on the road to recovery” after reporting that overall UK sales had recovered to 87% of pre-pandemic levels.
 
Caffè Nero Group operates 618 stores in the UK and further 250+ locations in Poland under the Green Caffè Nero brand, the US, UAE, Turkey, Sweden, Ireland and Cyprus. The group also controls the Harris + Hoole coffee chain, which has 39 stores and holds a majority stake in UK-based Coffee #1.