Asda brothers now bidding for Caffe Nero
CAFFE Nero last night urged its lenders to back plans for a rescue deal after rejecting a shock takeover bid from the billionaire brothers behind Asda.
The proposal by Mohsin and Zuber Issa, who bought Asda for £ 7bn last month, was received late on Sunday night – just hours before Nero’s creditors were due to vote on a company voluntary arrangement (CVA).
The self-made siblings are the founders of petrol stations giant EG Group and are among Britain’s richest entrepreneurs, with a combined fortune of £3.6bn.
They reportedly offered to buy the struggling cafe chain from founder Gerry Ford and pay off its debts to landlords in full. But following discussions with lenders yesterday, Caffe Nero’s bosses dismissed the last-minute bid and vowed to continue with their proposed CVA, a type of insolvency that will help to repair its battered finances. Last night the company claimed the unsolicited approach from the Issa brothers was intended to derail the CVA process ‘as a precursor to opportunistically acquiring the company at a later date’.
Voting on the CVA continued into the night, with a result expected today. one insider suggested Caffe Nero would be a good fit with the Issa brothers’ empire, which already includes thousands of petrol stations and now Asda stores.
Mohsin and Zuber, aged 49 and 48 respectively, stunned the retail industry last month with their takeover of Asda, which returned the supermarket to British ownership for the first time in two decades.
The brothers built EG Group from a single derelict site in Bury to an international empire boasting 6,000 forecourts and 44,000 staff.
The ‘ rags to riches’ pair, whose parents moved from India to Blackburn in the 1960s, grew up in a terraced house but now own a £25m mansion in Knightsbridge and luxury homes in Lancashire.
But their decision to base Asda’s parent company in the tax haven Jersey has attracted criticism, while EG Group has separately come under fire for its lack of independent directors – seen as poor governance under City rules.
The brothers’ debt-fuelled method of business expansion has also raised eyebrows althought they say there has been recognition of EG’s inherent strengths and progress on several fronts this year.
EG Group has borrowings of more than £7.5bn, with the cost wiping out profits and reducing its taxable income to zero in two of the past five years. Their takeover of Asda, with partner TDR Capital, used another £4bn in debt from bonds and loans.
Caffe Nero was founded by American entrepreneur Ford, 63, in 1997. he had the idea for the business while he was travelling across europe and completing a PhD at oxford.