This story is from November 15, 2019

KKR, Bain, TPG eye Cafe Coffee Day holding

Global private equity majors KKR, TPG Capital and Bain Capital are among the investors who have signed a non-disclosure agreement to evaluate a potential share purchase in Cafe Coffee Day (CCD), said two sources familiar with the development.
KKR, Bain, TPG eye Cafe Coffee Day holding
(File photo)
Key Highlights
  • The chain’s owner, Coffee Day Enterprises, has kicked off the process by appointing IDFC Securities as the banker as it looks to pare Rs 4,980-crore debt after the suicide of owner V G Siddhartha in July
  • While Siddhartha in his letter had pegged a valuation of Rs 8,000-10,000 crore for the business, a potential deal will happen at a much lower valuation given the circumstances after his suicide
BENGALURU: Global private equity majors KKR, TPG Capital and Bain Capital are among the investors who have signed a non-disclosure agreement to evaluate a potential share purchase in Cafe Coffee Day (CCD), said two sources familiar with the development. The chain’s owner, Coffee Day Enterprises, has kicked off the process by appointing IDFC Securities as the banker as it looks to pare Rs 4,980-crore debt after the suicide of owner V G Siddhartha in July.

The contours of a potential transaction, including how much stake will be sold, is still being worked even as Siddhartha’s family wants to retain shareholding in the business which is housed under Coffee Day Global, said one of these sources. While Siddhartha in his letter had pegged a valuation of Rs 8,000-10,000 crore for the business, a potential deal will happen at a much lower valuation given the circumstances after his suicide.
Coffee Day Enterprises is yet to complete the investigation, expected to close by early December, into the accounts of the company and Siddhartha’s letter.
The interest of KKR, which is a shareholder in listed holding company Coffee Day Enterprises, is also interesting as its India head Sanjay Nayar stepped down from the company board earlier this week. The discussions are still at early stages and a deal could attract strategics and family offices, besides commodity players who are interested in an integrated coffee business.
The potential valuation of CCD, India’s largest cafe chain, could be between Rs 4,000 crore and Rs 6,000 crore in this deal, said the first source mentioned earlier.
“While there are strategics who are interested, they are likely to engage after the investigation is complete,” said the second source mentioned earlier. TOI had reported in June that soft drinks major Coca-Cola is in talks with CCD. Siddhartha in his letter had also mentioned that cigarettes-to-biscuits conglomerate
ITC is also interested in CCD.
When contacted, Bain and KKR spokespersons said “no comment” while a CCD spokesperson “declined to comment on speculation”. A query sent to TPG did not elicit a response.
Share price of Coffee Day Enterprises has plummeted from close to Rs 200 in July to Rs 43.5, giving the company a market capitalisation of just Rs 925 crore. The shareholding of promoters has also come down from 54% to little over 25% over the last quarter as lenders have revoked pledged shares. The move to sell a large stake in CCD is part of listed Coffee Day Enterprises efforts to reduce debt through asset sales.
The company has already reached an agreement to sell Global Village Technology Park in Bengaluru to Blackstone for Rs 2,700 crore, out of which it will get Rs 2,000 crore in the coming weeks. About Rs 1,650 crore of the proceeds will be used to bring down debt to Rs 3,330 crore. It has also appointed to ICICI Securities to sell Sical Logistics, which carries Rs 1500 crore of debt.
Along with second tranche from the sale Global Village park of Rs 500 crore, Coffee Day expects to bring its debt down to Rs 1,300 crore in the next three quarters.
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