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Cooks Global to raise up to $10M selling convertible notes to wholesale investors

Friday 18th November 2016

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Cooks Global Foods, which owns the master franchise rights for the Esquires Coffee chain outside of New Zealand and Australia, is seeking to raise up to $10 million via a convertible note sale to fund its growth in China and for working capital.

The NZAX-listed company today launched a $6 million offer, with oversubscriptions of up to $4 million, for the redeemable convertible notes that pay interest of 9 percent for three years and are redeemable for shares or cash. 

Shareholders approved plans to raise capital a year ago after signing off on equity investments by chairman Keith Jackson and China's Jiajiayue Group of $4.5 million apiece. Jackson controlled interests now own 34 percent of Cooks while Jiajiayue holds 25 percent and Yunnan Metropolitan Construction and Investment Group 13 percent. The shares last traded at 9 cents, valuing the company at $37 million, and have dropped 25 percent this year.

“With the support of the capital raised in this offer, we see significant opportunities to accelerate growth in the year ahead," said executive chairman Keith Jackson. "We are particularly excited about the potential for Esquires in China, where we are supported by strong regional partners" including Jiajiayue Yunnan Metropolitan and BuBuGao, the company's joint venture partner in Hunan province.

The Esquires Coffee store network recorded a 13 percent gain to $20.4 million in constant currency sales in the year ended Sept. 30. The capital raising will help the company reach its target of 100 stores by the end of March 2017, from 90 at the end of September.

It generated 40 percent of revenue from retail sales in 2016, while royalty income accounted for 19 percent and 16 percent came from supplying products. China currently lags other markets in terms of sales. In 2016, about 36 percent of revenue came from the UK, 27 percent from Ireland and 19.8 percent from countries in the Middle East, with China ranked fourth at 15.3 percent. But faster growth is projected for China, with total stores forecast to rise to 42 by March 31, 2018, from 25 at Nov. 1 this year.

Cooks is rolling out Esquires in China with Jiajiayue, which has more than 600 supermarkets, and BuBuGao, with more than 472 supermarkets. Both rank in the top 30 retailers in China.

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