Quarterly Business Magazine

Jollibee Buys Coffee Bean for $350 Million; Shares Fall 8%

Posted :
Wednesday, July 24, 2019

Jollibee Foods Corp. will spend $350 million to purchase loss-making Coffee Bean & Tea Leaf, its largest acquisition. Shares of the Philippine’s biggest restaurant company fell the most in more than two years.

Jollibee will invest $100 million for an 80% stake in a Singapore venture set up with Vietnamese partners to acquire Coffee Bean, it said in a stock exchange disclosure. The rest of the amount will be in the form of advances.

Los Angeles-based Coffee Bean will add 14% to Jollibee’s global sales and expand its store network by more than a quarter, said Jollibee Chairman Tony Tan Caktiong. In 2018, the coffee chain with 1,189 stores reported a net loss of $21 million on revenue of $313 million.

Highlights

  • The Coffee Bean acquisition is Jollibee’s largest to date, following its $210.25 million takeover of American fast-food chain Smashburger, according to Bloomberg data.
  • The transaction will boost contributions from international businesses to 36% of total sales and closer to its goal of becoming one of the top 5 restaurant companies in the world in terms of market capitalization, Jollibee said.
  • Shares of the restaurant company that’s famous for its fried chicken fell as much as 8% in Manila, its biggest drop since Nov. 15, 2016.
  • Jollibee drags Philippines’ benchmark stock index out of bull market territory, closing at 8,161.49. Before Jollibee’s trading halt was lifted, the index was at 8,200.37.
  • Owners of Viet Thai International Joint Stock Company, Jollibee’s partner in Highlands Coffee and Pho 24, will subscribe to the remaining 20% of the Singapore venture.
  • The initial public offering planned for Highlands Coffee this month is delayed and under review.

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  • “There is market skepticism that this purchase will be earnings accretive considering Coffee Bean’s 2018 loss is about 12% of Jollibee’s profit last year,” said Rachelle Cruz, an analyst at AP Securities.
  • “Smashburger is yet to contribute positively on earnings and here is another acquisition that will probably be earnings dilutive in the next two to three years,” she said, referring to the U.S. burger chain Jollibee took over in 2018.
  • By Claire Jiao (Bloomberg)
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