The Irish-owned Insomnia chain of coffee shops has been taken over by the Icelandic conglomerate Penninn in a deal that values the business at €16 million.

Under the terms of the deal, Penninn is paying €12 million in cash and assuming debts of €4 million.

Insomnia's four biggest shareholders - chief executive Bobby Kerr, chairman John Clohisy, Harry O'Kelly and Chris Foxton - are reinvesting €6 million of the proceeds from the sale back into the business and will own 49 per cent of the new entity between them.

Mr Kerr will continue to run the company. Key Capital advised Insomnia on the transaction while Kaupthing Bank of Iceland advised Penninn.

Mr Kerr confirmed that a deal had been signed between the two sides. "This was an opportunity that just came along," he told The Irish Times.

He said the company is now planning to launch the Insomnia brand into overseas market, primarily in Scandinavia and Nordic countries.

"We are planning an entry into northern Europe in 2009," Mr Kerr said.

He said Finland was a possible first overseas market and the company was also likely to open shops in Iceland. "We might do acquisitions as a way of entry into these markets," he explained.

Penninn is a diversified group with interests in retail, coffee roasting, coffee distribution, office supplies and book stores. It has 1,200 staff and turnover of about €200 million.

Insomnia has 40 outlets in the Republic of Ireland and plans to add another 20 this year. Half of these will be operated in large Spar convenience stores. It currently employs about 180 staff.

Mr Kerr, who previously held senior roles with Bewleys, said the business grew by 30 per cent last year. The company achieved earnings before interest, tax, depreciation and amortisation of €1.6 million on revenues of €12 million in 2007. It is understood that a number of minority shareholders, who between them own about 25 per cent of the coffee chain, earned €3 million from the sale and will not be reinvesting in the new entity.

To date, Insomnia has been predominantly Dublin based. Mr Kerr said its business plan includes adding more shops outside the capital. "Our next focus is to get to the regions and our agreement with Spar is a good way of getting into those markets," he said.