Strauss Group (STRS) is planning an initial public offering of shares in its coffee unit, providing funds for expansion and an exit for partner TPG Capital, Chief Executive Officer Gadi Lesin said.
“An IPO is good for the company and allows TPG to exit, but there are points we don’t agree with and these are under negotiation,” Lesin, 47, said at the company’s Petach Tikvah, Israel headquarters yesterday. “We see ourselves entering more countries. An IPO will give us access to funds for growth and acquisitions.
A string of acquisitions and partnerships transformed Strauss into the number-one coffee seller in Brazil and the fourth-largest in the global retail coffee market, Lesin said. The unit, which also sells coffee in Russia and in Central and Eastern European countries, last year brought in about half of the Israeli food maker’s total sales.
Strauss is negotiating with private equity fund partner TPG to resolve a dispute over the destiny of the coffee unit, Lesin said. Ft. Worth, Texas-based TPG is seeking to exit its 25 percent investment in the business either through a sale or an initial public offering. Its suit accusing Strauss of misconduct was dismissed by a Dutch court in December 2013.
Strong Margins
A share sale in New York is in the best interest of all parties, TPG said in an April 7 e-mailed statement. ‘‘In the past three years, Strauss Coffee has developed significantly in terms of market share, revenue and profit. We need to use this momentum to create value for all shareholders, and we hope to finalize the IPO details soon,’’ TPG said.
The shares of Strauss Group, which have advanced 25 percent in the past 12 months, were trading 0.5 percent higher at 64.15 shekels at 1:29 p.m. in Tel Aviv.
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‘‘Coffee companies are enjoying strong margins because of the lower coffee prices last year and Strauss Coffee may be awarded a high valuation in any IPO,’’ Gil Dattner, an analyst at Bank Leumi Le-Israel BM in Tel Aviv, said today by phone. ‘‘On the other hand, this could diminish liquidity for Strauss Group, as it may split the interest of the relevant investor base.’’
In November 2013, TPG filed a suit against Strauss after the company dismissed Todd Morgan, a TPG representative who served as CEO of the food manufacturer. In the suit, TPG said Strauss overcharged its coffee unit ‘‘for many million Euros based on non-existent and insufficient services.’’
Chickpea Dip
Strauss Group, Israel’s second-largest food and beverage maker by sales, according to the company’s annual report, develops and markets dairy products, dips, salads and water purification products.
Lesin said the hummus chickpea dip market in the U.S., of which Strauss has captured a 64 percent market share, will continue to see double-digit growth as household penetration is low, with only about one-quarter of U.S. homes having ever tried it.
‘‘We will get to a $1 billion in sales, it’s just a question of when,” Lesin said of the business, which last year sold about $300 million worth of hummus.
Mexico and Australia, where the company operates its Obela joint venture with PepsiCo Inc., also have potential of being strong growth markets for hummus, he said.
Source: businessweek.com/news/2014-04-08/strauss-seeks-coffee-growth-as-continues-unit-ipo-talks-1
Strauss Seeks Coffee Growth as Continues Unit IPO Talks
