Financing

Tim Hortons China to go public in $1.7B deal

The fast-growing market for the Canadian coffee-and-doughnut chain is merging with a shell company that will take it public in the U.S.
Tim Hortons China goes public
Photograph: Shutterstock

The China operations of a Canadian restaurant chain is going public in the U.S.

Tim Hortons China has agreed to a merger with Silver Crest Acquisition Corp., a special purpose acquisition company (SPAC) formed by a Hong Kong investment firm. SPACs take money from public investors and use it to merge with a privately-held company, taking it public in the process.  

Silver Crest will merge with Tims China, take its name and will then begin trading on the Nasdaq Stock Exchange.

Tims China is a joint venture between Tim Hortons owner Restaurant Brands International and the private equity firm Cartesian Capital, along with other investors including Sequoia Capital and Tencent. Those shareholders will retain 80% ownership in the company under the deal, which is expected to be completed by the fourth quarter of this year.

By merging with Silver Crest, Tims China will get cash needed to help it grow. Much of the deal is based on the concept’s rapid growth in the country, which is being fueled by a rapid increase in coffee consumption there.

Tim Hortons has been developing quickly in China. Just a couple of years after opening its first location there, Tims finished 2020 with 137 locations in the country and expects to have 388 by the end of this year. More than 300 locations are either under construction or in negotiation, and Tims expects to operate more than 2,700 locations in China by 2026.

Revenue at the company, meanwhile, is expected to grow an average of 63% a year between now and 2026, according to a presentation from Silver Crest.

The investment firm argues that its near-term growth easily outdistances any other growth chain in the world, including U.S. concepts Wingstop and Chipotle.

Loyalty club members in the country now number 3.2 million, according to Silver Crest, while mobile orders are growing more than 400% per quarter since early last year.

Tims is hoping to ride a wave of coffee demand in China, where tea remains the beverage of choice but where coffee is quickly taking hold. Coffee consumption has grown by an annual rate of 39% since 2013.

A number of restaurant chains have been hoping to catch onto that growth—Starbucks considers China its key growth market, while investors quickly jumped on board Luckin Coffee before it collapsed amid a fake transaction scandal.

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