Jollibee gobbles up US burger chain

MANILA, Philippines - Jollibee Foods Corp. is acquiring 40 percent of US-based fast casual burger chain Smashburger for $99 million, marking its biggest investment overseas.

The deal includes an option to acquire an additional 35 percent from 2018 to 2021 and the balance of 25 percent between 2019 and 2026.

The purchase price for the remaining 60 percent will be based on the achievement of certain financial performance targets agreed between JFC’s wholly owned subsidiary Bee Good! Inc. and Smashburger.

JFC chairman Tony Tan Caktiong said the move would allow the Filipino-owned fastfood giant to get a bigger bite of the $100 billion US burger market.

Tan Caktiong said the acquisition would also make the US one of the company’s key drivers of long-term growth.  

The transaction is targeted for completion within the year.

Headquartered in Denver, Colorado, Smashburger currently has 339 restaurants with sales of about $339 million for 2015 or equivalent to 12 percent of JFC’s worldwide system wide sales for the same period.

It serves fresh 100 percent certified Angus beef burgers.

 Smashburger’s system wide sales have been growing at an annual rate of approximately 30 percent between 2011 and 2015 while its store network has been increasing annually by 20 percent.

“Smashburger is one of the fastest growing restaurant brands in the US and we are very excited to work side by side with the owners and management of Smashburger as we continue its growth. This acquisition will make JFC’s presence in the US more significant, going beyond the Filipino market and serving 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 segment in terms of sales,” Tan Caktiong said.

Rick Schaden, chairman and founder of Smashburger, said they are excited about their partnership with JFC.

“As founders and entrepreneurs we both have built teams that focus on bringing the highest and best tasting food to our restaurant categories. Founder and chairman Tony Tan Caktiong and I share a true passion for the restaurant business having opened and operated our very first restaurants and we believe our companies will cultivate that spirit today as we initiate this partnership,” Schaden said.

The acquisition of the initial 40 percent of Smashburger is based on a  $335 million enterprise value and a $248 million equity value.

Funding for the acquisition will come from internally-generated cash and a 10-year bank borrowing.

JFC tapped J.P. Morgan as financial advisor, Pillsbury Winthrop Shaw Pittman LLP as legal advisor and Isla Lipana & Co. as accounting and tax advisor for the transaction.

To date, JFC owns and operates 87 restaurants in the US, consisting of 32 Jollibee stores, 33 Red Ribbon outlets, 19 Chowking stores, and three Jinja branches. System-wide sales in the US account for five percent of JFC’s worldwide sales.

As of the end of August, JFC had a total network of 2,384 stores in the Philippines and 629 branches overseas (415 in China, 127 in Southeast Asia and the Middle East and 87 in the US).

In terms of joint venture deals, the local fastfood giant has 50 percent interest in Highlands Coffee with a total of  85 branches in Vietnam and the Philippines, Pho 24 (39 in Vietnam, Indonesia, Cambodia and Korea) 39 and 12 Sabu (20 in China).