AIRASIA (5099) - AirAsia acquires 80% stake in T&Co Coffee for RM914,000

This article first appeared in The Edge Financial Daily, on June 28, 2016.

KUALA LUMPUR: Budget airline AirAsia Bhd is buying an 80% stake in T & Co Coffee Sdn Bhd (T&Co) for RM914,000 cash to provide more lifestyle-focused offering to its passengers by expanding its in-flight menu. In a filing with Bursa Malaysia yesterday, AirAsia said it had entered into an agreement with Datin Charlene Yeo Ming Ling for the proposed acquisition.

The purchase consideration will be satisfied in part by cash of RM814,000 and the remaining RM100,000 by AirAsia credit shell, which may be used to pay for flights on all carriers within AirAsia Group.

The airline also entered into a shareholders’ agreement with Yeo, Datuk Douglas Cheng Heng Lee and T&Co to govern the foregoing parties’ relationship as the shareholders of T&Co.

T&Co has been supplying in-flight coffee and tea solutions to AirAsia since December 2013.

AirAsia said the purchase price of RM914,000 is based on T&Co’s agreed valuation of RM1.14 million, derived after taking into consideration its net tangible assets (NTA) of RM280,586 as of June 30, 2015 and the capitalisation of the amount owing to Cheng of RM852,341.

Upon capitalisation, the total shares of T&Co will be increased to 1.1 million, bringing up the NTA per share to RM1.03.

AirAsia said acquiring a majority stake in T&Co would allow it to have greater management control on T&Co, which will allow it to focus more on product development.

“Coffee and tea are an important part of the in-flight experience. A good coffee and tea offering would help AirAsia differentiate its brand in an increasingly competitive market,” it said.

It added that the move would allow AirAsia to raise premiums on beverages as well as improve the margin.

“A majority stake in T&Co would confer on AAB (AirAsia Bhd) greater control over product planning and development to ensure they are both in line with the company’s vision of delivering the ultimate in-flight coffee experience featuring the best of Asean beans — the ‘Barista in the Skies’,” it said.

AirAsia shares closed down four sen or 1.53% at RM2.57 yesterday, with a market value of RM7.15 billion.

AIRASIA (5099) - AirAsia acquires 80% stake in T&Co Coffee for RM914,000