Cooks Global Foods
Cooks Global Foods

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Cooks Global Foods re-organises Esquires China to drive grow

Cooks Global Foods (NZAX.CGF) announces it has signed a term sheet to reorganise its Chinese coffee house operations to accelerate growth in the Greater China region.

The term sheet, first signalled in April of this year, envisages the creation of a joint venture company between Cooks and the Guangzhou Juncheng Equity Investment Partnership (JCIP). The new company would: 

• become the Master Franchisee for the Esquires Coffee brand in China, Hong Kong, Macau and Taiwan; 
• takeover the assets and businesses of Cook’s wholly-owned subsidiary Beijing Esquires Management Limited (BEML), the exclusive franchisee of Esquires Coffee for mainland China; and
• fund and drive the development of branded coffee houses across the Greater China region.

For a 30% stake in the venture Cooks would contribute: BEML; the rights to operate the Esquires Coffee brand in Greater China; rights to future royalty payments and franchise fees in the region. Meanwhile, JCIP will contribute RMB46.67 million (~ NZ$9.75 million) in new funding to the venture for a 70% stake. These funds will be used to drive the development of the venture’s branded coffee network.

The new company would be headquartered in Shanghai, where it would also establish new stores. Cooks will continue to provide design, supply chain and other technical services to the new company.

The transaction is expected to result in a non-cash $4.0 million fair value write down to Cooks’ Chinese operations. This charge, which is higher than the $3.5 million signalled in April, is to be incurred in the financial year to 31 March 2017.

Cooks Global Foods Executive Chairman Keith Jackson said: “This agreement is an exciting development that reflects the enormous potential of the Chinese market.

“The agreement, which closely follows a model that major fast food franchisors such as McDonald’s and Yum Brands have implemented over the last year, will deliver Cooks a share in the profits in Greater China and substantially reduce the demands on our working capital.

“It introduces new business partners who know and understand the consumer dynamics in the fastest growing coffee market around the world. It also incentivises these partners to drive the growth and development in a way that Cooks cannot do itself.”

The agreement is subject to shareholder approval. Cooks envisages seeking this approval at a special meeting to approve the company’s previously-announced capital raising plans. Details on this special meeting, planned for later this month, are due to be announced imminently.

The capital raising initiatives, first announced to the NZX in March, will see cornerstone shareholders Jiajiayue Holding Group, YunNan Metropolitan Construction Investment Group and interests associated with Cooks Executive Chairman Keith Jackson contributing up to $10 million in new equity. Of this sum $3.5 million will be used to reduce debt (of which $2.14 million will be offset against debt owed to JJY and YMCI), with the balance of approximately $6.5 million used to accelerate the growth of Esquires and provide working capital.

On behalf of the Board
Keith Jackson
Executive Chairman


For further information: 
Richard Inder
The Project
Tel +64 21 645 643

About Cooks Global Foods
Cooks Global Foods operates in world markets and is listed on the NZAX market operated by NZX Limited in New Zealand under the code CGF. It owns the intellectual property and master franchising rights to Esquires Coffee Houses worldwide excluding New Zealand and Australia. Cooks currently operates or franchises Esquires Coffee Houses in the United Kingdom, Ireland, Canada, the Middle East, Indonesia, and China. Related businesses within the group include New Zealand-based supply companies Crux Products and Scarborough Fair, which supply product into both Esquires Coffee stores and other third party customers. For more information visit: www.cooksglobalfoods.com

About Jiajiayue Holding Group Limited
Jiajiayue Holding Group Limited is the major shareholder of Jiajiayue Group Limited (Shanghai Stock Exchange: 603708.SH) a listed entity trading on the Shanghai Stock Exchange, the later owns more than 600 supermarkets in China and employs over 30,000 staff. Jiajiayue Holding Group currently holds a 25% stake in Cooks Global Foods.

About YunNan Metropolitan Construction Investment Group Limited. 
YMCI directly holds an 18.6% stake in Cooks and is a major property development concern, owned by the Yunnan Provincial Government

Haiping Niu