FASTFOOD giant Jollibee Foods Corp. will soon be taking over control of US-based Smashburger following the signing of a $100 million (around P5 billion) share-purchase agreement (SPA) with the brand’s holding firm.
Jollibee told the Philippine Stock Exchange on Thursday its wholly-owned subsidiary Bee Good! Inc. has signed an SPA with Smashburger Master LLC (Master) for an additional 45 percent stake in Smashburger, boosting its ownership to 85 percent from 40 percent.
“The transaction, valued at $100 million, is expected to be completed in one to two months subject to government approvals in the United States and meeting certain closing conditions. JFC will pay Master through Bee Good! in cash,” Jollibee said.
Upon execution, Smashburger shall contribute 15 percent to the group’s worldwide systemwide sales from the current 5 percent, while also hiking its foreign businesses to total worldwide sales to 30 percent from the existing 20 percent.
The consolidation of Smashburger into Jollibee will increase its worldwide store network by 365 stores or 9.6 percent to 4,162 as well as its geographical presence from 16 countries to 21 adding Costa Rica, Egypt, El Salvador, United Kingdom (England and Scotland), and Panama.
The company said it eventually expects to achieve a 50/50 revenue split target as foreign operations were growing faster than in the Philippines.
As part of a debt restructuring, Jollibee entered into an executed commitment letter with SJBF LLC, the parent company of the entities comprising the Smashburger business, to provide financing to the latter in order to pay its loan obligation of approximately $80 million which will mature on May 15, 2018 and replace it with a much lower cost of long-term financing at more lenient terms.
Jollibee said it will borrow long-term loans from banks or issue loan guarantees to banks on behalf of Smashburger in order to fund the plan.
“A much lower cost long-term financing, made possible by Jollibee’s strong balance sheet, will significantly improve the net income of Smashburger immediately,” Jollibee Chief Finance Officer Ysmael Baysa said.
“It will also enable Smashburger to make more meaningful investments for healthier and faster growth … We look forward to the business making positive net income contribution to Jollibee’s profit in the medium term and significant profit contribution in the long term,” he added.
Last year, Jollibee saw its net income increase by 10.9 percent to P6.7 billion from P6.05 billion a year earlier on the back of strong sales and the acceleration of its store network expansion.
For the fourth quarter alone, net income grew 8.3 percent to P1.8 billion.