Caffè Nero founder Gerry Ford's bid to take the coffee chain into private ownership has been given the thumbs-up by analysts.
Ford made an informal approach to buy the 262-strong chain last week (17 August). As he has a 16.3% personal stake and the backing of private equity firm Paladin Partners, which holds 32%, experts believe a move is now likely.
In a briefing note, analyst firm Numis Securities said the combined shareholding meant Ford would need to find £114m for the remaining equity, although a significant proportion could be supported through additional company debt. However, Numis analyst Steve Davis warned that "other coffee bar operators or leisure groups" might also be tempted to make a bid.
Another City analyst said the move made sense as Caffè Nero's stock had been flat in recent months, despite the branded coffee bar market being far from saturated in the UK.
Jeffrey Young, managing director of market analyst Allegra Strategies, said that a move into private ownership would be in keeping with a recent trend in retail that has seen the likes of House of Fraser go private, and Woolworths and MFI consider doing so.
The UK coffee bar market
- Value: £1.1bn
- Growth forecast: 8.9% per annum
- Number of stores: 2,650
- Branded operations: 48%, Starbuck, Costa and Caffè Nero - the big three - accounted for 80% of new openings in 2005. The UK is the most heavily branded coffee bar market in Europe
Source: Allega Strategies
By Chris Druce