June 23, 2018, 10:21 am
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Fastfood giant ups stake in US burder chain to 85%

Jollibee Foods Corp. said it has formally signed a purchase agreement withSmashburger Master LLC (Master) for the acquisition of an additional 45 percent of SJBF LLC, the parent company of the Smashburger business in the United States. 

“This will increase BGI’s (Bee Good! Inc.) ownership in SJBF LLC from the current 40 percent to 85 percent. The transaction, valued at $100 million, is expected to be completed in one to two months subject to government approvals in the United States and meeting certain closing conditions,” the company said. 

Jollibee will pay Master in cash.

Jollibee said the acquisition of additional Smashburger shares will allow for a bigger contribution of the US operations to Jollibee’s global system wide salesat 15 percent, from the present 5 percent, and the sales contribution of foreign business to the global system wide sales to 30 percent, from the current 20 percent. 

“The consolidation of Smashburger into Jollibee will increase its worldwide store network by 365 stores or +9.6 percent to 4,162. This will also expand Jollibee’s geographical presence from 16 countries to 21 adding Costa Rica, Egypt, El Salvador, United Kingdom (England and Scotland), and Panama,” Jollibee said.

After the sale, it added, one of its priorities will be to change Smashburger’s debt structure – significantly reduce its financing cost for its $80 million loan and enable the business to make more investments for longterm growth. 

“Toward this objective, Jollibee also disclosed today that it executed a commitment letter to SJBF LLC, the parent company of the entities comprising the Smashburger business to provide financing to SJBF LLC in order to pay SJBF’s loan obligation of approximately $80 million which will mature on May 15, 2018 and replace it with a much lower cost of long term financing at more lenient terms,” the company said.

To implement this plan,Jollibee said it will borrow long term loans from banks or issue loan guarantees to banks on behalf of Smashburger.

According to YsmaeIBaysa, Jollibee chief financial officer, a much lower cost long term financing, made possible by Jollibee’s strong balance sheet, will significantly improve the net income of Smashburger immediately. 

“It will also enable Smashburger to make more meaningful investments for healthier and faster growth,” said Baysa, noting Smashburger’s positive earnings before interest, tax, depreciation and amortization.

“We look forward to the business making positive net income contribution to Jollibee‘s profit in the medium term and significant profit contribution in the long term,” he added.
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