While preparing for listing in the United States, Tim Hortons China business (hereinafter referred to as Tim China) will welcome a new shareholder, but this time it is a little mysterious.
Xiaoshidai learned today that tims China announced that it had obtained pre IPO Financing from a “world leading asset management company”. Interestingly, the coffee chain, which was founded in Canada, did not disclose the “sacred place” of the new investor. Before that, its shareholder lineup included Descartes capital, RBI, Tencent, Sequoia Capital, etc.
In addition, TIMS China also announced that it has received the first batch of commitments for listed private equity investment (hereinafter referred to as “pipe”), which will be invested when tims China merges with silver crest Acquisition Corporation (hereinafter referred to as “listing merger”).
Xiaoshidai introduced that in August this year, TIMS China announced that it agreed to merge with silver crest acquisition Corp, a blank check company (i.e. SPAC), and then listed on NASDAQ under the code “thch”. Including debt, the corporate valuation of China’s business is about US $1.688 billion.
“We have some flexibility because the merger process takes a little longer than we expected.” Peter Yu, executive partner of Descartes capital group and chairman of tims China’s board of directors, reiterated in an interview with Bloomberg today that the SPAC transaction is expected to be completed in the first quarter of 2022. This investment will help the company “continue to grow while we complete the merger”.
Let’s have a look.
With the addition of new shareholders, TIMS China will have a new income.
“The investor’s financing plan includes the immediate injection of US $50 million in capital in the form of convertible bonds, which can be converted into the shares of tims China at a premium of 15% of the listing merger price; in addition, the investor will participate in the pipe round of investment,” the company said today.
At the same time, TIMS China announced the investment commitments of several existing investors to pipe, including the subsidiaries of Sequoia Capital China and Eastern bell capital, which need to meet the requirements of practices and final documents.
“It is a great honor to welcome a new investor to become a partner of tims China.” Yopeter said today.
Although he did not disclose the identity of this mysterious new shareholder, yopeter gave some clues. He is not an outsider in the coffee market – he described it as “their deep participation and understanding of China’s coffee market and their exploration spirit of the industry coincide with tims’s concept of digital drive in China.”
“I believe that with their support, TIMS China will accelerate the realization of its five-year goal, including opening more than 2700 profitable stores, focusing on store quality management and bringing high-quality services to consumers.” Said yopeter.
At the same time, he said today that he welcomes new investors and current important partners, including Sequoia Capital China and Zhongding capital, to make important commitments to tims China pipe investment.
Tims China 2020 performance
So what about the coffee chain business that many institutions bet on?
Xiaoshidai noted that according to the latest data disclosed by tims China in October this year, the company’s total revenue in 2020 was 212 million yuan and its net loss was 143 million yuan. In the first nine months of this year, the company’s same store sales increased by more than 20%.
Tims China estimates that the revenue in 2021 will be US $103.9 million (about RMB 665 million); the adjusted store EBITDA (profit before tax, interest, depreciation and amortization) will be US $5.7 million (about RMB 36.26 million); the adjusted enterprise EBITDA will lose us $14.7 million (about RMB 93.52 million), and it is expected to turn loss into profit in 2023.
Tims China’s performance outlook for the next five years (2021-2026)
At present, the purpose of tims China’s new round of financing still includes opening more stores quickly.
Snack generation introduced it, Tim Hortons is subordinate to catering brand international Co., Ltd. (RBI), which also owns two major brands: Burger King and PoPeyes. In 2019, Tim Hortons officially entered China. Tim China is a joint venture established by RBI and Cartesian capital group, and has the exclusive franchise of Tim coffee in China (including Hong Kong, China and Macao, China).
Since its establishment, TIMS China has “won” many big investors, including Tencent, Sequoia Capital China fund and Zhongding capital. Among them, Tencent’s investment in tims China will also reach “hundreds of millions of Yuan” in May 2020. According to the previously disclosed two rounds of fund-raising purposes, accelerating store expansion is one of the key points.
Xiaoshidai introduced that the company proposed in 2019 to open 1500 stores in China in the next 10 years. In August this year, while announcing that tims China will have a separate IPO, Uber announced a new store opening goal of greatly accelerating: tims China will establish “leading” coffee shops and bakeries in China, and establish a profitable chain network composed of more than 2750 stores by 2026.
Today, according to the latest disclosure of the “Canadian National Coffee” brand, the number of stores in the Chinese market has exceeded 340. Snack generation introduced that Lu Yongchen, CEO of tims China, said in August this year that it is expected to have 400 stores in Huamen by the end of this year, or one every 36 hours, including flagship stores, classic stores and tims go.
From the past operation, TIMS China’s store expansion is likely to take advantage of the potential cooperation resources of new shareholders.
For example, after Tencent took a stake, TIMS quickly reached cooperation with multiple business segments of the Internet giant, including opening a music themed coffee shop with Tencent QQ music in May 2021, and announcing in June that it would cooperate with Tencent E-sports to open 10 home appliance competition coffee themed shops in the future.
Financing combination boxing
It can be seen that this coffee chain has made a combination of “spac + pipe” in this IPO.
“In fact, this is a new model popular in recent two or three years, which combines the advantages of IPO and backdoor listing.” Shen Meng, executive director of Xiangsong capital, told xiaoshidai today that the well-known Swedish oatmeal giant oatly and others have adopted a similar listing path.
First, let’s look at “spac”.
Snack generation introduced it, Silver crest is a special purpose acquisition company listed in the United States (SPAC, full name: Special Purpose Acquisition company), also known as blank check company, is supported by ascendant capital partners, a private equity company focusing on Greater China. In January this year, the company raised US $345 million in its IPO and said it was looking for targets in the field of high growth consumption and consumer technology.
So, what is pipe?
Public information shows that private investment in public stocks, also known as listed private equity investment (pipe), refers to private equity investment in the shares of listed companies, and an investment method of purchasing the shares of listed companies at a certain discount rate of the market price to expand the company’s capital.
Compared with traditional financing methods such as secondary issuance, pipe has relatively high financing cost and efficiency, less review by regulators, and does not need expensive roadshow costs, which greatly reduces the cost and time of obtaining capital. Pipe is more suitable for some listed companies that do not want to deal with the complex procedures of traditional equity financing and grow into medium-sized enterprises.
“Tims China is listed through merger with American spac. Spac is the most popular listing mode in recent two years, which is different from the traditional IPO. Due to the limited financing that may be obtained during the merger and listing of SPAC, pipe will be carried out simultaneously for additional financing.” Shen Meng said to xiaoshidai that this operation is “to obtain more funds with a simpler process to support enterprise development”.
Shen Meng said that pipe can be regarded as private placement financing in the same period of merger and listing with spac. “The purpose of locking pipe commitment is to better complete the merger and listing of SPAC. Spac + pipe is shorter and simpler than the traditional IPO process. It is the most popular listing mode at present.” He said.
Statistics show that the capital of China’s coffee chain market is surging, and the capital demand of the industry is becoming larger and larger. Even if it can successfully finance, TIMS China obviously has to face the “encirclement and interception” of many strong players and novices.
For example, in addition to tims China’s plan to expand its current more than 300 stores to 2750 by 2026, Starbucks has planned to settle in 230 cities and 6000 stores by the end of fiscal year 2022; McDonald’s expects, In 2023, there will be more than 4000 professional coffee brands under McCaf é. Xiaoshidai also pointed out that behind the blue bottle coffee supported by Nestle group, it has locked in the opening plan of at least two stores in China. In addition, manner received hundreds of millions of dollars of financing in May, and M stand completed financing of more than 100 million yuan and more than 500 million yuan. Seesaw announced that it had won 100 million yuan of financing in July.
Giants have different views. Snack generation has been introduced. For example, James Quincey said a few days ago: our strategy is not to just operate Costa coffee shop and catch up with others in this highly decentralized industry.