Tata Group, India’s largest conglomerate, and Jubilant Food-Works (which owns the Domino’s and Dunkin ‘Donuts in India franchise), are weighing an offer for the hot drink selling machine company of the Coffee Day Group, said people with knowledge of the matter.
For the venture, which has piqued the attention of marquee global private equity funds, the beleaguered Coffee Day Group is seeking Rs 2,000 crore.
Through its listed subsidiary, Tata Consumer Goods, which has emerged as the third most valuable firm in the $113 billion conglomerate after TCS and Titan, Tata Group is considering any future transaction. The selling has attracted the attention of Warburg Pincus, Goldman Sachs, and even Blackstone, the sources said. Any transaction will be an addition to the $32.6 billion merger and acquisition deals with an Indian aim and, Refinitiv data shows, announced as of April 1 , 2020.
The business “assesses different opportunities on an ongoing basis” and declined to comment further, a spokeswoman for Tata Customer said. Requests for comments were not answered by a representative for Jubilant FoodWorks, although Warburg Pincus, Goldman Sachs and Blackstone were not immediately contacted.
Earlier this year, along with a local real estate developer, Blackstone purchased the office park of the Coffee Day Group in Bengaluru for Rs 2,700 crore. Coffee Day Global, a 90% subsidiary of the listed Coffee Day Enterprises, houses the hot beverage vending machine company.
After the sudden death of founder V G Siddhartha last year, the Coffee Day Group has been selling properties to repay lenders. The individuals said that talks were on with possible suitors for the vending machine company and the MAPE consultant of the Coffee Day Community expects to call for expressions of interest soon.
“As part of a continuing turnaround exercise, Coffee Day aims to induce strategic and financial partners into various companies,” its spokesperson said. “There are several ongoing discussions to this end. None of these debates have entered a definitive stage at all.
Coffee Day had earlier sought a price of Rs 3,000 crore for the vending machine business, but lowered it later in light of the unit (corporate customers account for bulk of the business) being hit by office attendance rules triggered by Covid-19. The group will have to demerge the vending machine business from Coffee Day Global and then sell to the potential acquirer as the company houses other retail businesses too.
Coffee Day had previously sought a price of Rs 3,000 crore for the vending machine company, but later reduced it in view of the unit (corporate customers account for the bulk of the company) being affected by the rules of office attendance triggered by Covid-19. As the organisation still houses other retail firms, the group would have to demerge the vending machine sector from Coffee Day Global and then sell it to the future acquirer.
The potential deal comes as Tata Consumer plans to scale up its portfolio of food and beverages. The packaged goods unit of sister company Tata Chemicals was recently acquired. In collaboration with Starbucks, it also operates a coffee store. The Tatas have, because of their plantations, the supply chain and raw materials in place for the coffee sector. In the meantime, because of their association with Starbucks, they have gained significant experience on the retail side,’ said Arvind Singhal, founder of Technopak retail consulting. There is an opportunity for this business in the world, and because of their experience and financial muscle, the Tatas can do justice to it.