SSP Group plc1, a leading operator of food and beverage outlets in travel locations worldwide, has agreed to create a joint venture, whereby SSP will own a 49% stake in Travel Food Services Private Limited (“TFS”), a leading operator of food and beverage concessions in travel locations in India. SSP will acquire shares from the Kapur Family Trust, SNVK Properties Private Limited and KAPCO Caterers, part of the K Hospitality Group2 and subscribe for new shares in TFS3. K Hospitality operates a broad range of food and beverage outlets across India.
TFS operates food and beverage outlets in travel locations, with approximately 170 units in India including at six major airports in both domestic and international terminals and in railway stations. It also runs a number of airport lounges. In addition to these contracts, it operates food and beverage outlets at Muscat Airport in Oman. Its brand portfolio includes a number of strong in-house concepts as well as leading third party brands such as KFC, Krispy Kreme, Pizza Hut and Coffee Bean and Tea Leaf.
SSP is acquiring 49% of TFS for an expected net4 consideration of £57.9 million5. The acquisition will take place in two stages. The first stage is to acquire a 33% stake for an estimated net consideration of £39.0 million. This stage is expected to be fully completed by the end of February 2017. The second stage, to acquire a further 16%, is expected to take place by the end of 2018, for a net consideration of approximately £18.9 million, contingent upon the performance of the business. The consideration will be satisfied out of existing debt facilities. The transaction is expected to be earnings enhancing in the first full year of operation and to exceed SSP’s cost of capital by the third full year following the first stage of the acquisition.
TFS’ revenue was £41.7 million and EBITDA6 was £8.3 million for the year ended 31 March 2016. In the year ending 31 March 2017, TFS will benefit from the first time inclusion of the recent buyout of certain joint venture partners, the full contribution of new units opened in 2016 and on-going like for like sales growth. Taken together, these items are expected to add approximately £3.0 million to EBITDA in the year ending 31 March 2017. As at 31 March 2016, the gross assets of TFS were £25.6 million. Completion of this acquisition is subject to a number of conditions, consents and approvals.
Commenting on the deal, Kate Swann, CEO of SSP said; “This partnership is in line with the strategy we set out at our IPO. We have been looking for the right entry point into this exciting growth market and are delighted to have found an excellent partner in TFS. TFS brings a well-established business with a strong portfolio of brands. The combination of SSP’s international expertise in the travel sector and TFS’ strong local presence will provide an excellent platform for future growth in the Indian market.”
Sunil Kapur, Chairman, K Hospitality Group said; “We are delighted to be partnering with SSP. SSP’s international experience and proven track record, coupled with our knowledge and position in the region, means that we have a winning partnership to create a strong proposition for growth.”
- The acquisition is being carried out through a wholly owned subsidiary of SSP Group plc, SSP Asia Pacific Holdings Ltd.
- Sunil Kapur, Varun Kapur and Karan Kapur have agreed to guarantee the obligations of the Kapur shareholders under the joint venture documentation.
- Approximately 82% of the shares acquired by SSP Asia Pacific Holdings Ltd will be existing shares purchased from the Kapur Family Trust, SNVK Properties Private Limited and KAPCO Caterers (“Kapur Shareholders”). The remaining 18% will be newly issued shares in TFS subscribed for by SSP Asia Pacific Holdings Ltd. The new issue shares will all be issued as part of the first stage.
- The net consideration represents the estimated total consideration, net of SSP’s c£5.5 million share of the net cash in the joint venture.
- The expected net consideration of £57.9 million is contingent on the performance of the business and is subject to a cap of an additional £3.5 million.
- SSP will consolidate TFS and its group companies. The revenue of £41.7 million and EBITDA of £8.3 million in FY 2016 represent the proportionate consolidation of the TFS Group including its share of revenue and profit from its joint ventures. SSP’s share of the proportionately consolidated revenue and profit will be 33%. For accounting purposes SSP will fully consolidate TFS and its group companies (including its joint ventures). The comparable share of the fully consolidated revenue and profit is expected to be approximately 27%. Following the completion of the second stage, to acquire a further 16%, SSP’s share of the proportionately consolidated revenue and profit will be 49%. The comparable share of the fully consolidated revenue and profit is expected to be approximately 43%.
- All figures are based on an exchange rate of Indian Rupees to Sterling of 81.9.