Coffee chain rejects rival bid

Caffe Nero's Gerry Ford might bid higher

Coffee Republic has turned down a takeover bid by Caffe Nero.

Coffee Republic is a well-known brand in the UK, it is well recognised by customers and has a fantastic base of stores

Bobby Hashemi, Coffee Republic

The struggling chain thought the amount being offered by its rival was too low.

But Caffe Nero said the offer valued the company at a "substantial premium" to the current share price.

It said it was disappointed with the response but remained interested in acquiring the chain "at a price which meets with the aspirations of the shareholders of both companies".

Selling sites to Starbucks

That was enough to sent Coffee Republic share price higher, rising 1.75p to 2.75p.

Coffee Republic has seen its sales slide this year as competition has increased with the market leaders Starbucks and Costa Coffee.

The company abandoned a big expansion plan and put its 18 worst-performing shops up for sale.

On Tuesday it announced that Starbucks was buying 13 of the sites for up to £2m.

Merger speculation

Coffee Republic's founder and chairman Bobby Hashemi said he was confident he could revive the business.

"Coffee Republic is a well-known brand in the UK, it is well recognised by customers and has a fantastic base of stores," he said.

Speculation about a tie-up between the company and Caffe Nero began in the summer when Caffe Nero bought a stake in its rival.

A merger between the two would create a chain with more than 200 coffee bars in the UK.