Fast-food giant Jollibee Foods Corp. may bring in a strategic partner to co-own global specialty coffee chain Coffee Bean & Tea Leaf (CBTL) in lieu of borrowing more money to fund this $350-million acquisition, which the group hopes to seal by September this year.
In an interview with Inquirer on the sidelines of the stockholders’ meeting of DoubleDragon Properties Corp. on Friday, Jollibee founder and chair Tony Tan Caktiong said the group was looking at whether to pursue an earlier-announced borrowing plan for a new holding company for US-based CBTL.
“There are many [prospective] strategic partners showing interest to join. If they join, maybe we don’t need the fund,” Tan Caktiong said, when asked about the fund-raising.
The Jollibee chief said the borrowing plan was just an “alternative.”
It was earlier announced that Jollibee would invest $100 million to acquire 80 percent of the equity of a new Singapore-based holding company that will acquire up to 100 percent of CBTL.
Jollibee will also provide the balance of $250 million as advances to this holding company.
The plan was for this holding firm to issue within six to nine months preferred shares to repay JFC’s advances.
The group of Vietnamese businessman David Thai—owner of Viet Thai International Joint Stock Company (VTI), which is Jollibee’s partner in Highlands Coffee and Pho 24 business under Superfoods Group—will subscribe to the capital of the new holding company with an equity share of 20 percent.
Tan Caktiong said as part of the deal, Thai would have the option to increase his stake in the CBTL holding firm to 35 percent, while Jollibee will reduce its stake from 80 to 65 percent.
“We don’t know yet if JFC should own [all of] the 65 percent,” he said.
But if and when Jollibee brings in a strategic investor, he said it would retain the controlling interest.
“We don’t have any limit. We’re still discussing internally,” he said.
Tan Caktiong said Jollibee would want to bring in institutional investors with a long-term horizon, such as pension funds.
Jollibee aims to turn around loss-making CBTL in 12 to 18 months.
In 2018, CBTL incurred a net loss of $21 million out of $313 million in total revenue while total cash flow as measured by earnings before interest, taxes, depreciation and amortization (Ebitda) amounted to $23.7 million.
Some stock analysts fear the earnings drag from CBTL at a time when Jollibee is still digesting its acquisition of American hamburger chain Smashburger.