Philippine fast-food giant Jollibee Foods Corporation (JFC) is raising its stake in American hamburger chain Smashburger to majority with its planned purchase of an additional 45 per cent stake for $100 million, to be paid in cash.
In a disclosure to the Philippine Stock Exchange on Tuesday, JFC said its wholly-owned subsidiary, Bee Good! Inc. (BGI), will increase its ownership in Smashburger Master LLC, Smashburger’s parent company, from the current 40 per cent to 85 per cent when the deal is sealed.
JFC, which has exercised its long-planned option to buy an additional 45 per cent in the American burger chain, said it will pay Smashburger Master in cash.
Smashburger Master, which operates 365 Smashburger stores in the US, will retain the balance 15 per cent ownership.
The consolidation of Smashburger into JFC will increase its worldwide store network by 365 stores to a total of 4,162. This will also expand JFC’s geographical presence from 16 countries to 21 adding Costa Rica, Egypt, El Salvador, United Kingdom (England and Scotland), and Panama.
“With this acquisition of more shares, JFC will have a more significant business in the United States. The US will increase its contribution to our worldwide system wide sales from 5 percent to 15 percent,” JFC Chairman Tony Tan Caktiong said in a disclosure to the stock exchange.
He said the acquisition will enable JFC to participate in the very large mainstream American consumer market in addition to serving Filipino-Americans in the US. It will also allow the Philippine firm to achieve its goal of 50/50 revenue split between the Philippines and foreign businesses, Caktiong added.
Based on the financial data of the past six months annualized, Smashburger has annual system wide sales of $333 million and net revenues of $200 million.
One of JFC’s priorities will be to change Smashburger’s debt structure, to significantly reduce its financing cost and enable the business to make more investments for long-term growth, the company disclosed.
JFC operates the largest food service network in the Philippines. As of December 31, 2017, the company was operating 2,875 restaurant outlets in the country. It operates 922 stores overseas.