Cooks Global Foods says it plans to buy the Esquires Coffee Houses master franchise for China for $8.3 million, to be paid for with new Cooks shares.
The seller is a company which is ultimately owned by the Provincial Government of Yunnan province in China.
Esquires China owns and operates 10 branded stores in Beijing where it is the third largest cafe chain behind Starbucks and Costa. It sub-franchises a further six in China.
It will end up owning about 15 percent of Cooks, making it the second largest shareholder.
The 65 million new shares would be issued at 12.8 cents per share compared with the market price of 15 cents.
Cooks will repay nearly $7.6 million of the Chinese company's debts and give it an interest-free one-year loan of about $1.5 million to fund its day-to-day operations as well as growth plans.
The Chinese business is run by Ellen Zhang, who used to be an Esquires franchisee running the Quay Street cafe in Auckland.
The deal is conditional and subject to government and administrative approvals in China. Cooks Global Foods and the seller would work through the transaction's conditions over the next few months.