Caffe Nero ups stake in Coffee Republic

Caffe Nero, the independent coffee bar chain, has upped its stake in loss-making rival Coffee Republic, sparking further takeover speculation.

The group, which now holds a 10% stake in Coffee Republic, began building up shares this week and today announced that it had secured a further £7m of bank funding to continue its expansion.

Gerry Ford, chairman of Caffe Nero, claimed the company had not yet decided what its intentions were towards Coffee Republic.

Caffe Nero now has £10m available for growth. The extra money will enable the group to fund its current expansion rate of three to four stores a month for the next 12 months. Without the extra money it would only be able to open two shops each month.

Openings will be concentrated outside London.

Ford said: "I would not say that the London is saturated but growth is slower, and it's a much tighter market."

But Ford's view is not shared by City analysts. Stuart Price of WLB Panmure described the coffee bar market as "fragile".

"When you calculate their returns, they are remarkably low. They would get a better return by putting their money in the bank," he said.

by Christina Golding