Caffè Nero has rejected a takeover bid by the billionaire brothers who own EG Group, a chain of petrol stations, meaning the struggling cafe chain will continue with a separate restructuring process.
Caffè Nero on Monday published a letter on a portal for creditors that said the last-minute offer had been rejected because the bidders had not engaged with the company, so did not understand its financial situation.
Mohsin and Zuber Issa, the founders of EG Group, are understood to have written to Caffè Nero at the weekend to offer to buy the chain from its founder and main shareholder, Gerry Ford. The business has 800 cafes and employs more than 6,000 people in the UK.
Under the EG Group proposal, which was first reported by Sky News, EG would have paid in full the rent owed to Caffè Nero’s landlords in the wake of the Covid-19 pandemic. Like other hospitality firms, the chain has been hammered by the forced closure of the business during the first Covid-19 lockdown and the conversion to a takeaway-only business in parts of the UK through the autumn.
The firm, which owns 650 Caffè Nero-branded stores, 40 Harris + Hoole cafes and 100 Coffee#1 sites, appointed KPMG in September to help it negotiate rent cuts with its landlords. Landlords are due to vote on a company voluntary arrangement (CVA) later on Monday – a form of insolvency that allows retailers to reduce rent and shut shops.
Results of the vote, which ends at midnight on Monday, are expected on Tuesday afternoon.
The Issa brothers, from Blackburn in Lancashire, made their fortunes building EG Group (founded in 2001 as Euro Garages) into a big business that runs 6,000 filling stations in Europe, the US and Australia. It has partnerships with Starbucks and KFC.
Backed by the private equity firm TDR Capital, the billionaire brothers are buying Leeds-based Asda, Britain’s third-largest supermarket chain, from the US retail giant Walmart for £6.8bn. Walmart will retain a minority stake.
However, questions were raised over EG Group’s finances when its auditor Deloitte suddenly quit in October, reportedly because of governance concerns, and was replaced by KPMG. EG Group posted revenues of €20bn (£18bn) and a pretax loss of €82m last year.
Caffè Nero was founded in 1997 by Ford as an Italian-style coffee chain in London. Before the pandemic, it had more than 1,000 cafes in the UK and 10 other countries ranging from the US and Sweden to Oman, and served 135m customers a year.
Ford, who is also chief executive of the chain, recently said that Caffè Nero had worked hard to adapt to the situation by expanding its coffee at home range, launching click and collect via its app and offering a delivery service through Uber Eats.