MANILA (BLOOMBERG, REUTERS) - Philippines' Jollibee Foods Corp said on Wednesday (July 24) it will spend US$350 million (S$477.7 million) to acquire 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 US$100 million for an 80 per cent stake in a Singapore holding company set up with Vietnamese partners to acquire Coffee Bean, it said in a stock exchange disclosure. The remaining US$250 million will be in the form of advances, which will be paid back by the holding company.
Los Angeles-based Coffee Bean will add 14 per cent to Jollibee's global sales and expand its store network by more than a quarter, said Jollibee chairman Tony Tan Caktiong.
The coffee chain has 1,189 stores spread across the US, South-east Asia and the Middle East, and is rapidly growing in Asia. Nearly three-fourths of its outlets are franchised. In 2018, it reported a net loss of US$21 million on revenue of US$313 million.
Singapore's wealthy Sassoon family are shareholders of Coffee Bean, having brought the brand to Asia, the South China Morning Post reported. According to a New York Times report in April 2000, the family's move into coffee came about after Victor Sassoon, a former concert tour promoter, met pop singer Paula Abdul in Los Angeles.
When Sassoon mentioned he was thinking about bringing Coffee Bean to Singapore, Abdul told him "this is the greatest product in the world. You've got to get this company".
The Coffee Bean acquisition is Jollibee's largest to date, following its US$210.25 million takeover of American fast-food chain Smashburger, according to Bloomberg data.
The transaction will boost contributions from international businesses to 36 per cent 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 per cent in Manila, its biggest drop since Nov 15, 2016.
Owners of Viet Thai International Joint Stock Company, Jollibee's partner in Highlands Coffee and Pho 24, will subscribe to the remaining 20 per cent of the Singapore venture.
The initial public offering planned for Highlands Coffee this month is delayed and under review.
"There is market skepticism that this purchase will be earnings accretive considering Coffee Bean's 2018 loss is about 12 per cent 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 US burger chain Jollibee took over in 2018.