India's Cafe Coffee Day retail chain has ventured into the logistics business by acquiring majority control of cash-strapped Sical Logistics for around US$45 million.
    Tanglin Retail Realty Developments, a group company of Coffee Day Resorts, which operates close to 1,000 Cafe Coffee Day outlets across India, will acquire majority control of Sical Logistics through a combination of a direct stake purchase from the promoter Ashwin Muthiah, a preferential issue of shares and through an open offer, a person familiar with the deal said, reported Mint.
    The buyer will initially purchase a 15 percent stake in the company through a preferential allotment at $1.68 a share and follow it up with an open offer in accordance with India's takeover law.
    The deal will lower the promoter's stake in Sical to around 15 percent. Ashwin Muthiah, Sical's promoter, currently holds 42.66 percent of the company. Edelweiss is the exclusive adviser to the deal.
    The preferential allotment of 16,08,0010 shares to Tanglin has been cleared by Sical's board. Tanglin also informed the stock exchanges that it had acquired 39,52,000 shares in Sical on 12 November through a block deal.
    Cafe Coffee Day retail chain owner V.G. Siddhartha is flush with cash raised in April 2010 from three private equity funds - Kohlberg Kravis Roberts India Advisors (KKR India), Standard Chartered Pvt. Equity Ltd and New Silk Route.
    They invested $212.74 million for a 25 percent stake in the company, which also owns a private equity fund, Global Technology Ventures, three resorts in southern India under the Serai brand and Terra Firma, a waste-management business.
    The acquisition will give Siddhartha access to logistics services such as stevedoring, port terminals, Customs house agency, shipping agency, trucking, railroad and warehousing facilities that Sical built over the past decade as trade boomed in the world's second fastest growing major economy.
    Sical handles around 26 million tonnes of bulk cargo and 500,000 containers a year. The firm reported a net profit of $5.84 million on revenue of $119 million in the year to March 2010.
    Sical's delivery network includes an exclusive walk-in berth at Chennai port for ships carrying bulk cargo; a container terminal at Tuticorin port; 225,000 sq. ft of storage across 17 warehouses; owned and regularly contracted fleet of more than 1,000 transport vehicles and container freight stations at three locations across India.
    Apart from being an attractive investment opportunity, Sical will also cater to the in-house supply chain requirements of the diversified group with interests ranging across production and export of coffee, hotel properties and furniture. It currently relies on multiple service providers for its supply chain requirements.
    Several people Mint spoke to said that Ashwin Muthiah, the chairman of Sical, has come under pressure to sell his holding in the company because he was strapped for cash to fund a $50 million foreign currency convertible bond (FCCB) redemption coming up in March-April 2011.
    Muthiah also faces hurdles in raising funds from the market for redeeming the FCCB because banks and financial institutions would be wary of lending money to him due to the financial troubles surrounding Southern Petrochemical Industries Corp, the parent company's flagship fertiliser unit at Tuticorin in Tamil Nadu.

Source: Cargonews Asia