Jollibee buys into US chain

ASIAN fastfood giant Jollibee Foods Corp. has completed a deal to buy an initial 40-percent stake in American burger chain Smashburger for $99.5 million.

In a disclosure to the Philippine Stock Exchange on Tuesday, Jollibee said it had funded the acquisition using a 10-year loan from Metropolitan Bank and Trust Co.

Through wholly owned unit Bee Good Inc. (BGI), Jollibee acquired the initial 40 percent stake in Denver-based Smashburger Master LLC, but it has an option to acquire full control of this privately held food chain through 2026.

The deal allowed Jollibee to enter the mainstream American hamburger market.

Smashburger is an American burger chain known for serving 100-percent certified Angus beef burgers that are smashed on the grill to sear in the juices, creating what has been described as “upscale quality burger served at a great value.” Smashburger is “one of the best tasting burgers in the US,” Jollibee said.

The deal, which was based on an enterprise value of around $335 million, allows Jollibee to increase its interest by another 35 percent between 2018 and 2021 as well as gobble up the remaining 25 percent between 2019 and 2026.

This acquisition is seen to make JFC’s presence in the US more significant, going beyond the Filipino market and serving mainstream consumers in the $100-billion US burger market, a food segment which is estimated to be almost three times larger than the pizza, sandwich or coffee segments in terms of sales.

Smashbuger has 339 restaurants worldwide in 35 US states and seven countries with sales of about $339 million in 2015, equivalent to 12 percent of JFC’s worldwide sales for the same period. It has 184 company-owned and 155 franchised restaurants. Its system-wide sales have expanded by an annual rate of 30 percent between 2011 and 2015 while store network has been growing by around 20 percent annually.

For Jollibee, this deal is also seen to make the US one of its most important markets and drivers of long-term growth. Jollibee has a total of 3,013 restaurants worldwide, of which 2,384 are in the Philippines.