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Thu 30th Sep 2021 - Judge dismisses challenge to Caffe Nero restructuring plans
Judge dismisses challenge to Caffe Nero restructuring plans: A High Court judge has dismissed a landlord-backed challenge to the restructuring of Caffe Nero after finding that there was no clear route for postponing an electronic vote on the plan amid an eleventh-hour takeover bid for the coffee chain from EG Group, the main holding company of the Issa brothers. Judge Michael Green dismissed landlord Ronald Young’s claim at the High Court that Nero Holdings Ltd’s company voluntary arrangement (CVA) contained material irregularities and was unfair to creditors. The Gerry Ford-founded Caffe Nero sought approval to enter a CVA with the support of more than 90% of its creditors, after the business, like many of its peers, had been significantly impacted by the pandemic and subsequent restrictions imposed on its trading throughout 2020. A small number of landlords were not happy with the arrangement, which meant they would receive 30p per every pound in rent owed by the company up to 30 November 2020. The CVA was approved by the required 75% of creditors by the deadline of 30 November, 2020. EG’s bid for the company was lodged at 9pm the day before and was rebuffed. The company said that its refusal to delay the CVA vote was warranted as the bid was late and unsolicited. Young, who is the landlord of the Caffe Nero site in Henley Street, Stratford-Upon-Avon, challenged the decision of the creditors to approve the CVA, which on the basis it “unfairly prejudiced his interest” and there had been some “material irregularity” in the decision process. Young, who received financial support for his case from the Issa brothers, argued that the decision by the CVA nominees and directors not to delay the vote to consider the last-minute offer from the EG Group more carefully was unfair. The Issa brothers had offered to repay landlords’ debts in full as they attempted to take control of the chain. During the trial, the company said that Young had no right to bring the challenge due to the arrangement he had with EG Group. In the filings, it showed that EG paid £100,000 to Young, in return for his undertaking not to accept any settlement offer from the company and “not to withdraw the Challenge Application save with the consent of EG”. Justice Green said that supervisors of the CVA proposal – Interpath Advisory – took a “strong and rational” decision not to delay a vote on the plan after a late takeover bid, when even a short postponement carried a risk that the coffee chain would fall into administration. He said: “Balancing all the relevant factors and the risks involved, under considerable time pressure and without any clear route for postponing an electronic voting procedure, the conclusion that the nominees came to was well within the range of what a reasonable nominee could have come to in those circumstances.” A Caffe Nero spokesperson said: “We welcome the positive verdict and are delighted that the judge supported our position on all counts. This has absorbed a lot of time and attention over the last nine months and we are grateful to our creditors, our staff, our advisors and, especially, to our landlords for their patience and understanding during this case. This was an unsolicited and unwelcome attempt to destabilise our business by the EG Group, who funded a single landlord to pursue the challenge. We look forward to managing our business without further disruption. Since trading restrictions have been lifted, our sales have gone from strength to strength and we are now closing in on pre-pandemic levels.” Court filings show that as part of its offer for Caffe Nero, which has more than 600 coffee shops across the UK, EG was submitting “a proposal ascribing an enterprise value of £350m-£400m to the company”. On Mohsin Issa, who gave evidence during the trial, Justice Green said: “It is perfectly clear that Mr Issa remains intent on acquiring Caffe Nero. He said a number of times that he could pay the £400 million into Court immediately pending the conclusion of negotiations. Such intent is also demonstrated by EG’s subsequent acquisition of the majority of the company’s mezzanine debt. Mr Issa explained that this was not done to engineer a default, as suggested by the company, but rather to forward his desire to purchase the business. Again I have no reason to disbelieve Mr Issa’s evidence and the funding of Mr Young’s challenge shows a commitment to the original terms of the EG Offer and the desire to put enhanced terms to the company’s creditors rather than force it into administration.”

One day to go before release of updated Premium Database of Multi-Site Companies, 73 companies being added: A total of 73 new multi-site companies, operating 417 sites, have been added to the next edition of the Propel Premium Database of Multi-site Companies, which will be released tomorrow, Friday (1 October), at midday. The updated Propel Multi-Site Database, which is produced in association with Virgate, includes international growth concepts making their UK debut, expanding vegan brands, regional coffee operators and a number of brands growing through franchise. Premium subscribers will also receive a 6,200-word report on the new additions to the database. The comprehensive database is updated monthly and provides company names, the people in charge, how many sites each firm operates, its trading name and its registered name at Companies House if different. Alongside this, Premium subscribers will also receive the third edition of the New Openings Database, which is produced in association with StarStock, on Wednesday, 6 October, at midday. It focuses on newly announced openings and upcoming launches in the sector and is updated every month. Premium subscribers also receive access to Propel’s library of lockdown videos and Friday Wrap interviews and now also have access to a curated video library of the sector’s finest leaders and entrepreneurs, offering their insights on running outstanding businesses in the sector. Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before our 6am send-out plus regular video content and regular exclusive columns from Propel insights editor Mark Wingett. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The regular single subscription rate of £395 plus VAT for operators and £495 plus VAT for suppliers remains the same. To subscribe, email jo.charity@propelinfo.com.
 
Tortilla to list with £70m valuation: Shares in Tortilla Mexican Grill will begin trading on 8 October with a £70m market capitalisation. The placing of new shares is expected to raise gross proceeds of £5m for the company and expected to raise gross proceeds of £23m for the selling shareholders. The company stated: “The placing was comfortably over-subscribed by high quality institutional investors. On admission, Quilvest will own approximately 20.4% and the board will own approximately 12.3%. of the issued ordinary shares. The company intends to use the net proceeds of the placing to accelerate its growth plans and execute on strategic opportunities in line with its long-term growth strategy. This includes accelerating the UK rollout, developing and executing on scalable franchise opportunities, expanding its cloud kitchen portfolio and other strategic initiatives. It will also provide access to capital should additional financing be required in the future to further expand the business.” Chief executive Richard Morris said: “We are thrilled to be announcing such a positive reception to our IPO, which reflects the strong Tortilla brand, great value-for-money proposition and the company’s exciting prospects for long-term growth. I would like to take this opportunity to thank all our Tortilla colleagues for their hard work and commitment to the business, which has undoubtedly contributed to its success to date. We are delighted to welcome all new shareholders to the business, and we look ahead with excitement and confidence to this next exciting phase of Tortilla’s journey as a public company.”

Nightcap secures Reading site for London Cocktail Club: Nightcap, the hospitality group formed by investors Sarah Willingham and Michael Toxvaerd to back the UK bar and late-night sector, has secured a new site for its London Cocktail Club brand, in Reading. It has secured the former Smash site in Gun Street, central Reading. The site covers an area of approximately 2,861 sq ft with a 2am license on Thursdays, Fridays and Saturdays. The site is expected to be open before the end of the calendar year and will have an unrestricted capacity of 230. Following recent new site activity, Nightcap currently has a further five sites in legal negotiations across several of its brands. The Reading site is the third new site announced in the last eight weeks, with all new sites expected to be open and trading within this calendar year. The board said it “considers this to be a testament to Nightcap’s growing effectiveness in expanding its pipeline of potential London Cocktail Club locations across the UK”. Willingham, chief executive of Nightcap, said: “It is great to see how quickly The London Cocktail Club is ramping up its roll-out schedule which now includes three new sites announced in just eight weeks. Following the updates on the group’s strong trading announced in June and again in August, Nightcap is continuing to take advantage of the attractive terms being offered in the property market as we deliver on our national roll-out strategy.”

No more visa schemes for businesses, say government sources: The UK will not introduce visa schemes for any other sectors facing staff shortages, sources have told the BBC. On Sunday, the government set up temporary visa schemes for HGV drivers and poultry workers to limit disruption in the run-up to Christmas. Staff shortages in areas including hospitality and care have led to calls for a similar relaxation of post-Brexit immigration rules for other sectors. But government sources said firms should improve pay and conditions. Kate Nicholls, chief executive of UKHospitality, warned that without measures such as temporary visas the recovery from the pandemic would “falter”. She said the sector was helping people into apprenticeships, offering training schemes and noted that wages had risen by 19% over the last five years. However, she said a “chronic shortage of staff is a significant barrier to the hospitality industry’s recovery”, and urged the government to consider “all reasonable measures”. But the BBC has been told the Home Office and Department for Business, Energy and Industrial Strategy are not discussing the possibility of visas for other sectors. And one UK government source said: “In order to move to a high-wage, high-skilled economy, businesses should invest in their workforce and improve pay and conditions.” A government spokesperson said they were “closely monitoring labour supply” but “the government encourages all sectors to make employment more attractive to UK domestic workers through offering training, careers options, wage increases and investment.”

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