Jollibee to buy Coffee Bean chain for $350M
Credit to Author: ANGELICA BALLESTEROS, TMT| Date: Wed, 24 Jul 2019 16:17:40 +0000
LISTED Jollibee Foods Corp. announced on Wednesday it would buy the United States-based The Coffee Bean & Tea Leaf coffee chain for $350 million (P18 billion), making it the fastfood giant’s most significant and high-profile acquisition yet.
In a disclosure, Jollibee said its Singapore-based subsidiary Jollibee Worldwide Pte. Ltd. would invest $100 million (P5 billion) in a new, still-unnamed holding firm, through which it would acquire Coffee Bean. The group will finance the amount through a bridge loan.
The remaining $250 million would be advanced to the new company through the issuance of preferred shares in the next six to nine months.
The $100-million investment is equivalent to an 80-percent ownership stake in the new firm. The remaining 20 percent would be subscribed by members of the family that owns Viet Thai International Joint Stock Co., a Jollibee Group partner in the Superfoods Group that runs Highlands Coffee and Pho24. Its business are mainly in Vietnam.
“The acquisition of the [Coffee Bean] brand will be Jollibee’s largest and most multinational so far, with business presence in 27 countries,” said Tony Tan Caktiong, Jollibee founder and chairman.
The acquisition is expected to be completed in 60 days upon the execution of the purchase agreement.
Once done, Coffee Bean is expected to contribute 14 percent of Jollibee’s global systemwide sales and 26 percent to its total network. It is also expected to raise the company’s international business’ contribution to 36 percent of worldwide sales, and bring Jollibee closer to its vision of becoming one of the world’s top five restaurant firms in terms of market capitalization.
“This acquisition will enable Jollibee to become an important player in the large, fast-growing and profitable coffee business,” Caktiong said.
Coffee Bean would be Jollibee second largest business after the Jollibee brand, and account for 14 percent of its worldwide system sales.
The fastfood titan plans to list the new company in the next three to five years. This was cited as a factor in postponing Highland Coffee’s initial public offering scheduled for this month.
As of end-2018, the number of Coffee Bean branches stood at 1,189. Most of these are franchised, and the rest company-owned.
Coffee Bean has 284 stores in the United States; 447 in Southeast Asia, including the Philippines (139), Indonesia (101), Malaysia (99), and Singapore (61); 336 in other Asian countries and 122 in other regions.
‘Appetite for mergers’
Also on Wednesday, Philippine Competition Commission Chairman Antonio Balisacan said Jollibee should notify his agency of its planned acquisition.
He described the proposed transaction as “a testament of the appetite for mergers on a global scale, enabled by a vibrant local economy.”
“Companies all over the world comply with different competition laws, and with Jollibee being a homegrown firm, it is expected to comply with the Philippine Competition Act,” Balisacan said.
In a comment, AAA Southeast Equities Inc. President Matthew Cabangon called the acquisition “a mixed bag” for Jollibee.
“It could hurt the stock in the near term, since [Coffee Bean] has been operating at a loss for years now and will hurt [Jollibee’s] earnings-per-share. It is a dilutive acquisition,” he explained.
On the upside, he said the purchase would significantly expand Jollibee’s footprint, which global investors would take interest in.
Jollibee shares fell by 8 percent or by P21.80 on Wednesday to finish at P251 apiece. It was the top-traded company on the stock market during the day.
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