Billionaire brothers warn Caffe Nero of legal challenge after bid rejection

The billionaire brothers who are in the process of buying Asda have warned Caffe Nero that its proposed restructuring will face a legal challenge after the coffee shop chain snubbed their takeover bid.

Sky News has learnt that lawyers for EG Group, the petrol retailing giant headed by Mohsin and Zuber Issa, have written to Caffe Nero’s parent company to highlight the likelihood of a landlord rebellion against its company voluntary arrangement (CVA).

Under the CVA, which is being run by KPMG, landlords face losing the majority of the rent arrears they are owed, while EG is promising to pay them in full – a sum understood to be worth tens of millions of pounds.

Responding to the offer from EG – revealed by Sky News – Caffe Nero dismissed it as “an unsolicited, highly uncertain approach” and said “any transaction would be subject to a period of detailed due diligence, as well as the agreement on the terms of any sale, and would require the consent of the group’s external lenders and shareholders”.

A source close to the situation said that EG’s law firm, Kirkland & Ellis, had told Caffe Nero that a deal could in fact be agreed within two weeks, reducing any uncertainty for the company and its workforce of more than 5000 people.

It is also said to have disputed Caffe Nero’s assertion that the Issas had made no expression of interest in the business prior to this week’s offer.

The CVA vote went ahead as planned, with an announcement of the result likely to be made on Tuesday afternoon, according to insiders.