The Philippines' largest fast-food chain operator, Jollibee Foods Corporation, has just made its biggest multinational acquisition to date. The company, which owns and operates the popular Jollibee fast-food chain of restaurants, announced that it has just purchased the US-based coffee and tea brand The Coffee Bean & Tea Leaf for $350 million.
According to its filing with the Philippine Stock Exchange on Wednesday, Jollibee's net investment in the acquisition will be around $100 million, with total consideration for the entire deal amounting to $350 million on a debt-free basis. The deal will be initially financed by the company's Singapore-based subsidiary, Jollibee Worldwide Pte Ltd, with the rest of the amount paid for through a bridge loan.
The net investment for the acquisition will be used to acquire an 80 percent stake in the holding company that will be put up to completely purchase The Coffee Bean & Tea Leaf. Meanwhile, the rest of the amount will be paid as advances to the holding company. Within six to nine months, the holding company will be issuing preferred shares amounting to around $250 million.
Jollibee's business partners have also announced their intentions of getting into the deal. The Philippine company's partner in the Superfoods Group, the Viet Thai International Joint Stock Company, has announced its intention of subscribing to the capital of the new holding company.
The family that owns the Vietnamese company, which operates popular Vietnam-based brands such as Pho 24 and Highlands Coffee, have revealed that they will be buying a 20 percent equity share of the newly formed holding company. Meanwhile, Jollibee has revealed that it will be launching an initial public offering (IPO) for the new holding company within three to five years. Upon its official acquisition, Jollibee intends to consolidate The Coffee Bean & Tea Leaf with its financial statements.
Jollibee chairman Tony Tan Caktiong said that the acquisition of The Coffee Bean & Tea Leaf is meant to greatly increase the company global reach. The acquisition is expected to add around 14 percent to the company global sales and 26 percent to its total store network. After its main Jollibee stores, The Coffee Bean & Tea Leaf will become its second-largest business.
Caktiong believes that the acquisition will enable the company to become a major player in the highly profitable and growing global coffee business. For this reason, the company intends to accelerate the growth of the coffee brand by strengthening its marketing, brand development, and franchise systems.
Jollibee's shares dropped on Wednesday following its announcement. Prices declined by around 7.99 percent as investors expressed concerns over the company's earnings in the coming quarters following the acquisition.
