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Coffee shop chain Caffè Nero has rejected a takeover bid from the billionaire brothers behind petrol forecourt business EG Group.

The Issa brothers, who are also buying the grocer Asda, made the offer on Sunday ahead of a key meeting between the coffee chain and its creditors.

Caffè Nero is seeking approval for a rescue deal that would see its rents cut after sales slumped in lockdown.

It dismissed the bid as "opportunistic" and vowed to go ahead with its plan.

The chain - which owns 650 own-brand stores and 150 Harris & Hoole coffee shops - has been hit hard by the reduced footfall in city centres during the pandemic.

This has forced it to seek a company voluntary arrangement (CVA) - a type of rescue deal that could see some of its stores shut and rents cut on others.

Insiders had said Caffè Nero, which employs 5,000 people, would be an obvious extension to the Issa's EG Group business.

EG runs 6,000 petrol forecourts in Europe, the US and Australia, and already has brand partnerships with the likes of Starbucks and KFC.

Under the bid, , Caffè Nero's landlords would also have been paid in full for any rental arrears.

However, in a statement Caffè Nero criticised the approach as a "clear intention is to disrupt the CVA process".

It added the move could be a precursor to the Issa brothers "opportunistically acquiring the company at a later date".

The company said: "Importantly, the group's external lenders have indicated their support for the CVA process.

"The lenders are aware of the approach referred to above and have not requested a change in strategy and shareholders have undertaken to reject the offer."

Financial concerns

In September, a consortium of Zuber and Mohsin Issa and private equity firm TDR Capital won the battle to buy Asda from its US owner Walmart.

It means the grocer will return to majority UK ownership for the first time in two decades.

The Blackburn-based brothers were both made CBEs after the news.

However, questions have been raised about the Issa brothers' finances after EG Group's auditor, Deloitte, suddenly quit in October and was replaced by KPMG.

EG Group said the auditor had signed a "clean audit" for EG Group's 2019 financial accounts and there had been "no disagreements on any auditing or accounting matters".

Later in October, agency Moody's also downgraded the EG Group's credit rating, criticising the firm for failing to improve its financial reporting and management processes.

One of its concerns was the way the group reported its £8bn of debt, which Moody's estimates to be 11.4 times its underlying earnings.

EG Group said it "strongly" disagreed with Moody's decision, adding that the downgrade "doesn't reflect the continued, wide-ranging investment in strengthening the business and the significant progress made over the past 12 months".