Tel Aviv, Israel, May 4 - Ofra Strauss, Chairperson of the Strauss Group, and Erez Vigodman, Group CEO and President, announced today that an initial agreement had been signed for the acquisition of 25% of the shares of Strauss's coffee company with TPG Capital, among the world's leading private equity investment firms, with the aim of realizing Strauss's global growth strategy in coffee.
TPG is expected to invest $288 million in the coffee company, based on $1,005 million Enterprise Value pre-investment and $1,293 million post- investment. After setting off financial liabilities which the parties decided would remain in the coffee company, the Equity Value pre-investment is $865 million, and $1153 million post-investment.
TPG was also granted a two-year option to acquire a further 10% of the coffee company's shares at the company's value in the present transaction, plus 6% interest per year.
At the closing, Strauss Group is expected to record a capital gain of $85 million, net of transaction costs and after allocating the fair value to the option granted to TPG.
Ofra Strauss said today: "We chose to introduce a financial investor with leading global competencies to our coffee company, who, together with us, will accelerate the realization of our coffee company's global expansion strategy. The board of directors and I believe that introducing TPG as a partner in the coffee company will maximize the company's value as it executes the moves it has planned in the next few years, and in creating a world leading global coffee company."
Erez Vigodman said today: "In the past six years we have turned our coffee company into one of the fastest growing businesses in the world coffee industry, while applying a unique competitive strategy, expanding in geographical regions with highest growth rate in coffee, building a leading competitive position in all markets where we are active, and creating high value for all our stakeholders.
We are proud of the recognition by one of the world's leading equity funds in our vision, conviction, strategy and everything we have built in our coffee company and in Strauss Group as a whole, as well as of the fact that TPG shares our strong belief in further development of the coffee company, based on our strategy implementation.
We strongly believe that the connection between Strauss and TPG's people, infrastructures, high competencies and financial resources will enable us together to build one of the most exciting and leading global companies in the world coffee industry."
Avi Ben Assayag, Deputy CEO and COO of Strauss Group , said today: "The chosen partner and the enterprise value of the transaction attest to the value that the Group has created to date in realizing its global expansion strategy in coffee, and the great potential inherent in its complete realization. We believe that together with TPG Strauss will succeed in leveraging TPG's strong capabilities in mergers and acquisitions and in locating the strategic sources of funding required to realize our strategy.
TPG has access, management infrastructure and worldwide deployment in the most interesting markets in the Group's focus, including Latin America, Eastern Europe and Asia."
Stephen Peel, partner at TPG Capital and Head of TPG's Eurasia Group, said today: "Strauss Coffee has rapidly established itself as one of the leaders in the coffee business with innovative, high quality products that are dedicated to the specific tastes of the markets they serve. We have been impressed by management's ability to achieve significant growth, especially through well orchestrated acquisitions in developing and emerging markets, and we look forward to helping Strauss further extend its leadership position in a consolidating global coffee market."
Geoffrey Fink, Head of Central & Eastern Europe for TPG Capital, added, "We are pleased that one of the most well-respected companies in Israel has chosen TPG to finance the next stage of its international growth. We are excited at the prospect of joining forces with this very successful management team."
About the transaction:
Strauss Group announced that it has signed a binding initial agreement with TPG Capital for the acquisition of 25% of the shares of Strauss's coffee company. TPG is to invest $288 million according to an enterprise value of $1,005 million, neutralizing financial assets and liabilities, and an equity value of $865 million before the money (the amounts include expected interest receivable from January 1st 2008 until the expected closing date).
In addition, TPG is granted with two years option to acquire an additional 10% of Strauss Coffee at the same valuation grossed up at 6% per annum.
TPG Capital LLP is a leading global private investment firm with approximately $40 billion of capital under management.
TPG is interested in partnering the Strauss Group in the implementation of the coffee company's global expansion strategy. Strauss views TPG as a partner able to help realize this strategy, particularly in the areas of M&A, financial management and creating sources of funding required for the implementation of the strategy.
The Strauss coffee business is incorporated under Strauss Coffee BV which is a wholly-owned Dutch subsidiary of the Strauss Group; the coffee business of Strauss in Israel (which is included in the transaction) will be transferred to Strauss Coffee BV in conjunction with TPG's acquisition of shares in the Dutch company.
Closing of the transaction is subject to the completion of confirmatory due diligence by TPG, the receipt of all necessary regulatory approvals including the Israeli Tax Authorities' approval of the restructuring, financing arrangements for the investors, and the signing of detailed agreements between the parties. At the closing, Strauss Group is expected to record a capital gain of $85 million for the 25% sold, net of transaction costs and after allocating the fair value to the option granted to TPG (based on unaudited accounts and expected equity of Strauss Coffee as of the closing; the final amount of the capital gain will be determined only after the closing and may differ).
About Strauss:
The Strauss Group, Israel's second largest food and beverage Group, has over the past few years become an international corporation with a steadily growing part of its business conducted outside of Israel. The Group employs 11,000 people and operates nineteen production sites in eleven countries. Over the last five years the Group has consistently achieved double-digit growth, doubling the volume of its business in that period and generating NIS 6 billion (around $1.7 billion) in turnover at the end of 2007, of which 45% originated in international activities.
The Group focuses on key consumption trends in the food industry via three business divisions in Israel: Health & Wellness, Fun & Indulgence, and Coffee. The Group continuously expands its business activities outside of Israel, at present primarily through the Coffee Company, which is positioned as one of the world's ten largest coffee companies leading markets in Israel, Central and Eastern Europe, and Brazil.
The Group collaborates with a number of leading multinationals - Danone, PepsiCo and Lavazza - and is traded on the Tel Aviv 25 Index.
About Strauss Coffee:
Today, Strauss Coffee is the seventh largest coffee company in the world in terms of green coffee consumption and one of the world's fastest growing coffee companies over the past five years. During this period Strauss Coffee tripled its size, growing from NIS 1 billion in 2002 to NIS 2.9 billion at the end of 2007, with the international coffee business totaling NIS 2.3 billion (almost four times as high as the corresponding figure for 2002).
Strauss Coffee's activities focus on the R&G (Roast & Ground) sector and other supplementary coffee products (instant coffee, chocolate and cocoa powders, cappuccino, espresso, organic coffee); and on services in the coffee category, particularly solutions for AFH (Away-From-Home) coffee consumption.
The Company enjoys a leading position in coffee markets in Israel, Central and Eastern Europe, and Brazil; and is ranked as the Number 1 or 2 player in all markets where it operates (with the exception of Russia).
The geographic clusters in which the Company is active today include Israel, Brazil (through a partnership with the Lima brothers in Santa Clara), Poland, the Balkans (Romania and Bulgaria), the former Yugoslavia countries (mainly in Serbia), and the former USSR countries (mainly Russia and Ukraine).
The green coffee procurement center, which serves the entire Group, is located in Zug (Switzerland). Additionally, the Group owns green coffee processing plants in Brazil which export coffee for the Group's activities as well as for external customers worldwide.
Since the beginning of 2007, the coffee company has operated as one company (including the coffee business in Israel), reporting to the CEO and the management of the global coffee company.
In the next few years the Group plans to energetically accelerate the coffee company's growth and expansion process.
About TPG:
TPG Capital (Texas Pacific Group) is one of the world's leading private equity investment firms. The fund was ,founded in 1992 and has more than $50 billion of assets under management. Through its investment platform, TPG Capital, the firm makes significant investments in companies across a broad range of industries throughout North America, Europe, Asia and Australia. Portfolio companies controlled by TPG currently have combined revenues of approximately $128 billion, operate in more than 140 countries and employ about 500,000 employees. Fully aggregated, TPG portfolio companies would create the 15th largest business in the Fortune 500. Since 1992, TPG and its principals have had lead responsibility for more than 120 transactions, investing approximately $28 billion of equity capital across a number of different economic and credit cycles. TPG has about 150 professionals globally across 14 offices in eight countries. TPG's commitment to employees and markets is that the companies it partners will continue to offer the finest products and services in a supporting atmosphere that rewards success.
TPG Capital seeks to invest in world-class franchises across a range of industries, including:
-- Consumer (Beringer Wines, Burger King, Mey Icki)
-- Retail (Debenhams, J.Crew, Myer, Neiman Marcus, Petco, TOMY)
-- Travel and Entertainment (America West, Harrah's, Hotwire, Midwest Air, Sabre)
-- Media and Communications (Alltel, Avaya, Findexa, Hanaro Telecom, MGM, TIM Hellas, Univision)
-- Healthcare (Axcan Pharma, Biomet, Fenwal, IASIS Healthcare, Oxford Health Plans, Parkway Holdings, Quintiles Transnational, Surgical Care Affiliates)
-- Industrials (British Vita, Energy Future Holdings - formerly TXU, Graphic Packaging, Grohe, Kraton, Texas Genco)
-- Technology (Freescale, Lenovo, MEMC, ON Semiconductor, Seagate, SunGard), and
-- Financial Services (Ariel Reinsurance, Fidelity National Information Services, NIS Group, LPL Financial Services, Shenzhen Development Bank, Taishin Holdings).