Cooks enters transformational share purchase agreement

Overview

Cooks Food Group (Cooks) has entered a conditional sale and purchase agreement to acquire a group of companies owning the intellectual property and master franchising rights to Esquires Coffee Houses worldwide, other than in Canada, New Zealand and Australia.

Cooks is also in advanced negotiations to acquire a New Zealand based food processing business and certain offshore retail businesses.

All agreements are, or will be subject to, approval by Cooks shareholders under the Companies Act 1993, the NZAX Listing Rules and the Takeovers Code.

The transactions are transformational for Cooks having been a listed shell company for the past few years. In recognition of this transformation, Cooks intends to change its name to Cooks Global Foods if the transactions are approved.

Funding

Cooks chairman Keith Jackson says the company has also reached agreement, subject to shareholder approval, to raise more than $4.0m in cash from qualified investors to subscribe for shares. These subscriptions will fund the cash components of the purchase price for the intended acquisitions and provide working capital for the new group. New debt facilities have also been conditionally agreed with Cooks’ bankers.

Post-completion of the transactions Cooks also intends to look at undertaking a share purchase plan offer to give existing shareholders an opportunity to participate in the future of the company.

The Transactions

Cooks has entered a conditional sale and purchase agreement to acquire the shares of the New Zealand company Franchise Development Ltd (FDL).

FDL is owned by New Zealand coffee entrepreneurs Stuart and Lewis Deeks, who developed and sold the Esquires Coffee Houses business in New Zealand and Australia to ASX listed Retail Food Group in 2011. FDL and its subsidiaries hold the master franchisee rights for Esquires Coffee Houses to many parts of the world including Asia, the Pacific Islands, the Middle East and North Africa.

In connection with the transaction with Cooks, and through a $1.3 million secured advance from Cooks, FDL has acquired the Canadian company Esquires Coffee International, Inc., the owner and master franchisor of the global intellectual property rights to Esquires Coffee Houses excluding New Zealand, Australia and Canada. This includes franchisor rights with the Esquires master franchisee’s operating in Ireland and the United Kingdom respectively.

The purchase of FDL will be funded through an issue of shares in Cooks to an entity controlled by Stuart and Lewis Deeks and a cash payment of $300,000. The Agreement also provides for a future issue of shares to Stuart and Lewis Deeks if there is group over-performance. If approved, Stuart and Lewis Deeks will become the largest shareholders of Cooks with a holding of over 50%. The shares issued at completion will be subject to escrow restrictions.

Next Steps

Cooks is presently in negotiations to acquire further businesses. Subject to reaching contract on these proposed acquisitions, further details are intended to be announced to the market shortly. These acquisitions are also proposed to be predominantly funded through share issues by Cooks with those issued shares also subject to escrow restrictions, aligning the interests of the vendors with those of Cooks shareholders.

Following the conclusion of these negotiations, a listing profile will be completed for the new group and shareholder approval sought to undertake all of the transactions. Subject to Takeovers Panel and NZX approvals, Simmons Corporate Finance has been appointed to act as the independent adviser in relation to the transactions.

Mr Jackson says that the new business plans are to pursue a global growth strategy based on an integrated retail and supply chain business aligned with Esquires Coffee Houses internationally.

Further details of the transactions and the further acquisitions under negotiation will be announced in the coming weeks.