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TPG invests $288 million in Strauss Coffee

The Fort Worth-based firm has inked a preliminary deal with the Israeli food and beverage maker for a 25 percent stake in its coffee business.

TPG has purchased a 25 percent stake in Strauss Coffee, the wholly-owned coffee division of Israeli food and beverage company Strauss Group.

The $288 million (€181 million) deal values Strauss Coffee at slightly more than $1 billion, or $865 million setting off the division’s financial liabilities.

In addition to the minority shareholder stake, the Fort Worth-based firm will receive a two-year option to acquire an additional 10 percent of Strauss Coffee at a price 6 percent higher than the present deal terms.  If the deal gains Israeli regulatory approval, Strauss Group will record a capital gain of $85 million.

“We believe that together with TPG, Strauss will succeed in leveraging TPG’s strong capabilities in mergers and acquisitions and in locating the strategic sources of funding required to realize our strategy,” Avi Ben Assayag, deputy chief executive of Strauss Group, said in a statement.

TPG declined to comment on the deal.

Strauss’ coffee holdings include the second largest coffee grower in Brazil and a significant presence in Eastern Europe. Last month, Strauss reached a $93 million deal to acquire Russian coffee producer Cosant Enterprises.

Strauss Coffee sales rose roughly 24 percent between 2006 and 2007, and have emerged as one of the food company’s leading profit sources. TPG said it would back Strauss Coffee management.

TPG is no stranger to investing in international consumer-oriented companies such as Strauss. Last month, the David Bonderman-led firm finally exited Swiss fashion retailer Bally for an estimated $596 million after retaining ownership of the company for 9 years.

TPG, which manages more than $50 billion in assets, is currently raising an $18 billion mega-buyout fund, according to the Probitas Partners 2008 Private Equity Deskbook.