Tims China landed on NASDAQ! Raise nearly 200 million US dollars

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On September 29th, the Chinese business of global coffee chain Tim Hortons (referred to as "Tims China") was officially listed on NASDAQ! The total fund-raising volume is nearly 200 million US dollars.

According to Tims China, Silver Crest, a US special purpose acquisition company, held a special shareholders' meeting on August 18 this year to approve the merger with Tims China, and announced the completion of the merger on September 28th Eastern time. The next day, Tims China listed on NASDAQ under the stock codes "THCH" and "THCHW" and became the first SPAC share of Chinese coffee.

What is SPAC? As a special purpose acquisition company, SPAC is a way of backdoor listing. Different from shell listing, SPAC, as a listing platform (shell company), has only cash and no actual business and assets. This company will invest in mergers and acquisitions of pre-listed target enterprises, and the target enterprises will quickly achieve the purpose of listing financing through mergers and acquisitions with listed SPAC.

After IPO (initial public offering), SPAC will have up to two years to find the merger target. After a series of due diligence and financial audits on the target company, the shareholders of SPAC will vote on the project. If more than half agree, SPAC will promote the merger with the target company and trade on the market with the new stock symbol. If a suitable target is not found to complete the merger within two years, SPAC will be liquidated and $10 will be refunded to investors.

Compared with the traditional IPO,SPAC, it has the advantages of fast time, low cost, high success rate and simple process, which has great advantages for both investors and target companies. Of course, there are some risks in this way of listing.

Investors can go public at a very small price, but the purpose of most SPAC is to achieve listing. Compared with the traditional listing methods, there is a lack of historical management accumulation and follow-up development planning. After the completion of the SPAC type acquisition in the past year or two, there is a lack of motivation for development and will soon return to the origin.

In this merger with Tims China, about 99 per cent of Silver Crest shareholders chose to redeem shares, totaling more than $343 million. But shareholders must reverse their redemption decision by august 29th, with a final redemption ratio of 96%, for a total of $331 million.

Tims China's PIPE (listed private equity investment, in which fund companies can buy shares in listed companies at a discounted price) is expected to meet the minimum cash condition of $175 million for the deal. At the same time, Tims China also reached an agreement with an investor to buy up to $100m of shares in the company in the three years after the SPAC merger.

Choosing the path of "SPAC+PIPE" vaguely reveals the urgent listing mentality of Tims China. Tims China also cut its "entry" valuation by nearly $300m after equity financing in March.

As a legendary North American coffee chain, RBI, the parent company of Tim Hortons, established a joint venture with Descartes Capital in 2018 and opened its first Chinese store in Shanghai's people's Square in February of the following year.

Tims's initial goal in entering the Chinese market is to open 1500 stores in China within 10 years. But Lu Yongchen, Tims China CEO, said in a recent interview with Chinese Entrepreneur. Adjust the plan to "increase to 2750 stores by 2026". At present, there are 400 Tims stores in the Chinese market, and according to the latest plan, Tims will open one store every 36 hours.

Tims is developing rapidly, and its current situation in China is the same as Lucky's early expansion path, the more expansion, the more losses. According to Silver Crest data, from 2019 to 2021, Tims China's revenue was 57.257 million yuan, 210 million yuan and 640 million yuan respectively, mainly from "product sales of self-operated stores", "franchise fees", "other franchise business" and "e-commerce business".

2021 is the fastest growing year for Tims China, but its net loss has also doubled. In the three years since its arrival in China, Tims has lost a total of more than 600 million yuan, mainly due to the epidemic and rising raw material costs.

In terms of products, Tims China takes the route of "coffee + dessert + light food", with regular Italian coffee, doughnuts and grilled sandwiches. The price is in the range of 15-30 yuan, between Starbucks and boutique coffee. In order to attract more younger consumers to pay attention to the brand, Tims China has used a variety of scenes to build the brand's youthful attribute in recent years. Such as e-sports theme store, full-time master theme store and so on.

The location of the store will also be located around Starbucks, attracting coffee consumers who cannot be satisfied by Starbucks stores. Facade style, will also be more bright and vibrant than Starbucks, can create a more warm third space.

Different from Tim Hortons's position of buying and leaving in Canada, such pricing is slightly high-end in China and will become the bottleneck of its competitiveness. But even though the losses are expanding, Tims China has not stopped expanding its stores.

Lu Yongchen, CEO of Tims China, said in a recent interview with other media that the company uses a variety of forms and sizes to improve density and convenience, and uses advanced analytical technology to select sites, so as to improve the economic efficiency of the store, cover more coffee scenes and improve brand awareness. At the same time, the product strategy of "coffee + warm food" is launched, which can effectively meet the differentiated needs of different users and the desire for high-quality and cost-effective products.

This approach is like Lucky, Manner and so on to provide cost-effective coffee, but can not provide dining space, as well as Starbucks to provide coffee light food + space, but the high price to neutralize the problem.

Slowly through different scenarios and product strategies, we will attract more customers who are in demand for fast, cost-effective chain coffee and the third space chain coffee, as well as give more people access to coffee.

With the title of "Chinese coffee SPAC coffee first share" landing on NASDAQ, can Tims China show its "North American Legend" demeanor in the future? Let's wait and see.

Photo Source: Internet