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by Simon Lord,
last updated 28/08/2015

13 August 2015 - Cooks Global Foods, owners of Esquires Coffee outside Australasia, has secured a conditional $9 million equity injection and signalled a public offer. The move will see additional Chinese investment but brothers Stuart and Lewis Deeks are ending their association with the brand after more than 14 years

Conditional investments by China’s Jiajiayue Group and Cooks Global Foods Executive Chairman Keith Jackson are planned to fund Esquires Coffee growth plans including the store roll-out across Asia, the Middle East, Europe and North America. In a statement to the NZAX, CGF advised:

Cooks Global Foods (CGF) today announces it has secured conditional equity commitments from a significant strategic investor which, along with an additional commitment from CGF’s Executive Chairman, Keith Jackson, will raise new capital of $9 million to underpin the long-term future of the business.

It also announces it intends to launch a public offer to raise up to an additional $9 million to accelerate the global expansion of the Esquires Coffee brand.

China’s Jiajiayue Group Co. Ltd (JJY), and Mr Jackson, have signed a conditional heads of agreement with CGF to each contribute capital of $4.5 million in exchange for 35,156,250 shares priced at $0.128 per share.

JJY already works closely with CGF, with the parties having formed a joint venture in 2013 to develop 30 Esquires outlets in Shandong Province, China. JJY is one of the largest retail companies in Shandong, employing almost 18,000 staff and operating more than 550 supermarkets.

As part of the transaction, JJY and Mr Jackson will together also acquire an existing 40.29% stake in CGF from DSL Management, an entity controlled by CGF Executive Directors Stuart Deeks and Lewis Deeks, for $0.05 cents per share. CGF has entered a share sale agreement with DSL Management where it has agreed to procure this sale.

The transactions are subject to conditions as are further described below, including non-associated shareholder approval. JJY and Mr. Jackson may, in concluding the formal agreements with CGF, introduce further investor(s) to join them in undertaking these transactions.

CGF Executive Chairman Keith Jackson said: ‘Esquires Coffee is at the leading edge of global branded coffee outlets. As coffee consumers become more sophisticated, they look for the artisan, authentic, Fairtrade and Organic coffee experience that is at the heart of the Esquires brand. The new capital will allow CGF to further realise this potential around the world.’

‘Having JJY as a major shareholder aligns the interests of our important strategic partner with other shareholders and the vision of the company while we continue to accelerate our expansion in China and further afield.’

‘Meanwhile, the capital raised will enable the delivery of a five year strategic growth plan focused on both existing and new international markets to gain critical mass. This includes CGF’s share of investment in new stores in Asia, the Middle East, Europe and North America.’

Heads of Agreement

Together, JJY and Mr Jackson have agreed to:

1. Subscribe for 70,312,500 new shares in CGF at $0.128 per share, to a total value of $9.0 million;
2. Acquire 136,348,909 existing shares from DSL Management at $0.050, for a total value of $6.8 million.

Once complete, JJY will hold 103,330,705 ordinary shares, 25.28% of the shares of CGF. With the ordinary shares acquired from this transaction and existing holdings, Mr Jackson will control the largest shareholding in CGF, with a 34.96% stake.

JJY will be invited to nominate one director to the Board of CGF following the completion of the transaction.

The sale of DSL’s stake in CGF signals the end of the Deeks brothers’ long standing association with Esquires Coffee, as they will leave the Board of CGF and their executive roles in order to pursue other interests.

CGF Executive Chairman Keith Jackson said: ‘The Board wishes to thank Stuart and Lewis for their dedication to and passion for the Esquires business. Their contribution to Esquires has been significant.’

Commenting on their departure, Stuart Deeks said: ‘Building the Esquires business globally has been rewarding for both of us; however after 14 years it is time for a new challenge.’

Approvals Required

The transactions are subject to JJY and Mr Jackson signing formal documents with CGF in relation to the transactions. These may, once completed, contain additional conditions including as to securing finance. Further information will be released in due course.

In order to comply with the Takeovers Code and NZAX Listing Rules, the transactions are subject to shareholder approval at CGF’s annual meeting to be held in late September 2015.

CGF expects to send a circular to shareholders explaining the transaction and the approvals required at the same time as it sends the notice of meeting. Shareholders will also receive an independent report on the merits of the transactions as required by the Takeovers Code.

The sale of the shares by DSL Management under this transaction has required NZX approval for the early release of approximately 45% of the shares held by DSL Management from escrow. Those escrow arrangements were agreed on 15 October 2013 and are due to expire on 15 October 2015. Accordingly the release will only be for a very short component of the overall escrow term.

Public offer

Associated with this transaction CGF intends to launch a public offer for new shares to raise up to an additional $9 million to further assist the growth of the Esquires Coffee brand worldwide.

Details of the planned public offer will be released to the market before it is launched. No money is currently being sought and no applications will be accepted unless the subscriber has received the offer document.

‘This transaction is an excellent outcome for all parties and is a significant milestone in CGF’s history, securing our long term future as we look to realise our vision of being the world’s largest Organic and Fairtrade Coffee retailer operating at least 800 Esquires stores globally by 2020,’ Mr Jackson said. ‘The global café industry is being driven through growth in both emerging markets and in the traditional developed markets and Esquires is sharing in that growth.’

Note: While Cooks Global Foods owns most of the global rights to Esquires, the brand is owned outright by Retail Food Group in Australia and New Zealand and operates entirely independently of Cooks. RFG announced a new look for Esquires New Zealand in March 2015. 



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