HOMEGROWN fast-food giant Jollibee Foods Corp. will acquire a majority stake in South Korea's Compose Coffee as part of a deal valuing the target at $340 million, the company said on Tuesday.
It will be Jollibee's largest acquisition in terms of the number of stores and continues the company's expansion overseas, which will account for the majority of its branches in the future.
Unit Jollibee Worldwide Pte will acquire 70 percent of privately-held Compose Coffee Co. Ltd. and JMCF Co., Ltd. for $238 million.
Majority-owned Titan Dining Partners II Ltd. (Titan Fund II) will take five percent and the remaining 25 percent will be held by South Korean private equity firm Elevation Equity Partners Korea Ltd.
A shareholders agreement among the buyers and a share purchase deal between the purchasers and sellers was signed on Tuesday.
Jollibee Worldwide will get two board seats, while Elevation will have one. JFC Chief Financial Officer Richard Shin will become chairman of Compose Coffee. There will also be no management shakeup.
"The completion of this transaction is subject to closing and financing conditions," JFC told the stock exchange, adding that payment, which could still be adjusted, would be made once the deal is closed.
Regulatory approvals are expected to take 45 days.
Shares in Jollibee, which has a market value of $4.29 billion, rose 0.44 percent, or P1, to P226.20 each, outpacing a 0.62-percent decline in the broader stock market index.
"This is a good move by Jollibee to further expand its global footprint and take advantage of attractive opportunities in promising markets," said Juan Paolo Colet, managing director at investment bank China Bank Capital in Manila.
The acquisition is expected to be cash accretive, creating shareholder value over the long run, he added.
Compose Coffee has 2,470 stores, all franchised, giving it a debt-free balance sheet, and good cash returns and profit margins, said Jollibee, which will increase its global store network to 10,000 with the deal.
The investment gives Jollibee access to South Korea, which ranks third globally in terms of coffee consumption per capita, the company said.
"The business that Compose Coffee has built in the past 10 years is impressive and we are excited to play a major role in its next phase of growth," Jollibee Foods Chairman Tony Tan Caktiong said.
Elevation Managing Partner Gordon Cho, meanwhile, said "we believe that JFC's resources and expertise in F&B (food and beverage) brand development combined with Elevation's entrepreneurial mindset and local market expertise in value coffee will provide synergies in securing a sustainable future for Compose Coffee..."
Compose Coffee will be consolidated to JFC's financial statements immediately upon completion of the acquisition. The purchase is expected to add two percent in revenues, bringing the international business' contribution to 41 percent. It is also expected to add 12 percent in earnings before interest and tax.
Compose Coffee and its roasting facility were founded in Busan in 2014. The brand was named South Korea's favorite coffee shop at the Forbes Korea's 2023 Korea's Most Loved Brand Awards.
Known for its sweet-style spaghetti, burgers and fried chicken, Jollibee is dominant in the Philippines, outselling McDonald's and Yum Brands' KFC.
In 2019, Jollibee invested $100 million to acquire loss-making Coffee Bean & Tea Leaf.
WITH A REPORT FROM EARL JOHN ALFARO
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