Jollibee buys Compose Coffee chain for $340M

K-POP KimTae-hyung of BTS is a Compose Coffee endorser. —COMPOSE COFFEE/INSTAGRAM

The highly competitive coffee segment is proving to be a still-attractive market for Jollibee Foods Corp., which has long been vocal about its aggressive expansion into the beverage segment, with the homegrown fast-food giant clinching yet another coffee chain buyout deal.

The company led by billionaire Tony Tan Caktiong on Tuesday announced that its subsidiary, Jollibee Worldwide Pte. Ltd. (JWPL), had signed definitive agreements to acquire 70 percent of South Korea-based Compose Coffee for $340 million.

READ: Jollibee buys South Korea’s Compose Coffee for $340M

Elevation Equity Partners Korea Ltd., a private equity firm with a focus on mid-market buyouts in South Korea and the rest of Asia, will have a 25-percent ownership stake. Titan Dining II LP, another equity firm in which Jollibee has a 90-percent participating interest through JWPL, will own 5 percent of Compose Coffee.

“The business that Compose Coffee has built in the past 10 years is impressive and we are excited to play a major role in its next phase of growth,” Caktiong said in a statement.

Jollibee closed higher by 0.44 percent at P226.20 per share on Tuesday as investors priced in news of the acquisition.

Founded in Busan in 2014, Compose Coffee currently has 2,470 stores—all franchises—making it Jollibee’s largest brand in terms of store count. The flagship Jollibee brand, the maker of the iconic Chickenjoy meals, has more than 1,600 stores across the globe.

READ: Jollibee seeks bigger buzz in China, but ‘slowly’

Compose Coffee is expected to help lift Jollibee’s revenues by 2 percent, according to the fast-food chain.

“Compose Coffee will also further strengthen [Jollibee’s] balance sheet, since it has no existing loans nor nontrade obligations,” the company said.

Juan Paolo Colet, managing director at investment bank China Bank Capital Corp., said acquiring Compose Coffee was “a good move” to further expand Jollibee’s international footprint and take advantage of attractive opportunities in promising markets.

“The acquisition is expected to be cash accretive, so this deal should help create shareholder value over the long run,” Colet said in a Viber message.

Denise Joaquin, analyst at COL Financial, also noted that the deal was “positive,” considering that it was expected to boost earnings this year.

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Once Compose Coffee is fully consolidated into Jollibee, overseas stores will account for 66 percent of the group’s store network.

Jollibee’s acquisition of the Korean coffee chain is among its largest investments to date, next to specialty coffee brand The Coffee Bean and Tea Leaf (CBTL), signaling its strengthening confidence in the coffee segment.

The company that also operates chicken barbecue chain Mang Inasal acquired CBTL for $350 million in 2019, two years after it had acquired a controlling interest in Highlands Coffee.

Ernesto Tanmantiong, Jollibee CEO, earlier said they were aiming to triple profits to over P26 billion in five years, betting on coffee and tea to help drive growth. INQ