TPG Buying 25% of Strauss Coffee

TEL AVIV, May 4 (Reuters) – Private equity firm TPG has agreed to buy a 25 percent stake in Strauss Group's (STRS.TA: Quote, Profile, Research) coffee operations for $288 million, the Israeli food and beverage company said on Sunday. TPG [TPG.UL] will receive a two-year option to acquire another 10 percent of the coffee activities at the current valuation plus an additional 6 percent per year, Strauss said in a statement to the Tel Aviv Stock Exchange.

The price is based on a $1.005 billion enterprise value pre-investment and $1.293 billion post-investment, Strauss said.

Upon completion of the deal Strauss, Israel's second-largest food company, expects to post a capital gain of about $85 million. Its shares were up 3.7 percent in early afternoon trade in Tel Aviv, double gains in the broader market. Strauss is a market leader in roast and ground coffee in central and eastern Europe and the second-largest coffee company in Brazil.

“We chose to introduce a financial investor with leading global competencies to our coffee company, who, together with us, will accelerate the realisation of our coffee company's global expansion strategy,” Strauss Chairwoman Ofra Strauss said in a statement. Avi Ben Assayag, deputy CEO and chief operating officer of Strauss, said the company planned to leverage TPG's strong capabilities in mergers and acquisitions and in locating strategic sources of funding to carry out its expansion strategy.

Stephen Peel, partner at TPG Capital and head of TPG's Eurasia Group, said: “We have been impressed by management's ability to achieve significant growth, especially through well orchestrated acquisitions in developing and emerging markets, and we look forward to helping Strauss further extend its leadership position in a consolidating global coffee market.”

TPG has more than $50 billion of assets under management. Strauss's coffee business is incorporated under Strauss Coffee BV, a wholly owned Dutch subsidiary. Strauss's coffee business in Israel will be transferred to Strauss Coffee BV in conjunction with TPG's acquisition of shares. The deal is subject to the completion of due diligence by TPG and receipt of the necessary regulatory approval in Israel. Strauss had sales of 6 billion shekels ($1.7 billion) in 2007, including 2.9 billion from coffee.

Strauss Coffee is the seventh largest coffee company in the world in terms of green coffee consumption.

($1 = 3.455 shekels) (Reporting by Tova Cohen; Editing by Richard Hubbard)