Strauss Group Ltd. (TASE:STRS) subsidiary Strauss Coffee BV has signed a contract with Germany's Viva Coffee GmbH to produce freeze-dried instant coffee for Strauss. Most of the produce will be shipped to Strauss's coffee operations in Russia and other Eastern European countries. The five-year contract has an option to extend by three years. Strauss estimates that it will need to invest $3.5 million to upgrade Viva Coffee's production equipment.
Strauss will finance the deal with equity and a €28.6 million from German banks. Strauss will repay Viva Coffee's €2.6 million bank loan. If Strauss exercises its option to extend the deal, it will repay the balance of Viva Coffee's loan and it will pay the company's owners €750,000 a year in rent.
Strauss Coffee has an option to acquire Viva Coffee for €53 million.
The deal comes after Strauss last week cancelled its acquisition of Espresso Club in a disagreement over the price.
Strauss's share price rose 0.8% today to NIS 46.97, giving a market cap of NIS 5 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on January 22, 2012
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