Fastfood chain operator Jollibee Foods Corp. (JFC) said it plans to raise $111 million through bank borrowings to partially finance the acquisition of South Korean coffee chain Compose Coffee.
JFC chief finance officer Richard Shin in a virtual media briefing Thursday the company was in talks with several banks for the planned borrowing.
He said the remaining $128 million would be funded through internally-generated funds.
Jollibee reported early this month it would acquire a 70-percent interest in Compose Coffee for $238 million as part of the global expansion of its coffee and tea businesses.
Jollibee Foods’ majority-owned Titan Fund and private-equity firm Elevation will assume the remaining 5 percent and 25 percent, respectively.
Shin said the company would aggressively expand Compose Coffee in South Korea, given the huge growth potential in the East Asian country.
Compose Coffee has 8-percent market share in South Korea with 2,600 stores. Its Americano coffee is priced at 1,500 won.
“We are very focused on Korea for at least the next five years,” Shin said when asked if JFC planned to bring Compose Coffee to the Philippines and other Southeast Asian countries.
“We would like to take market share growth in Korea. That will be a better return on shareholders because it is quite lucrative and profitable,” Shin said.
Shin said he expects the return on investment for the acquisition in five to six years based on a modest growth rate projection.
Compose Coffee will become JFC’s biggest brand in terms of number of stores.
This will bring Jollibee Group’s store network closer to 10,000 stores, more than 66 percent of which will be outside the Philippines.
Shin said Compose Coffee has a debt-free balance sheet, superior cash returns and excellent profitability margins, evidenced by its high double-digit earnings before Interests, taxes and depreciation and amortization (EBITDA) and EBIT margins due to its capital-light, 100-percent franchised business model.
The fast-food giant said the acquisition would add 2 percent to its revenues, 12 percent to EBIT and 34 percent to store count.
