Jollibee unit to buy 45% more equity in Smashburger

Fast-food giant Jollibee Foods Corp. (JFC) has executed a deal to raise its stake in Smashburger Master LLC and take majority control of the American hamburger restaurant chain.

Through wholly-owned subsidiary Bee Good! Inc. (BGI), Jollibee has signed a purchase agreement with Denver, Colorado-based Smashburger for an additional 45 percent share valued at $100 million.

The agreement will increase Be Good Inc.’s ownership in Smashburger to 85 percent from 40 percent.

The transaction will be settled in cash and is expected to be completed in one to two months subject to government approvals in the US and certain closing conditions.

“JFC’s acquisition of more shares in Smashburger will allow it to have a more significant business in the United States, increasing the sales contribution from that country to JFC’s worldwide system wide sales from the present 5 percent to 15 percent and the sales contribution from foreign business worldwide system wide sales from present 20 percent to 30 percent,” Jollibee said.

The consolidation of Smashburger into JFC will increase its worldwide store network by 365 or 9.6 percent to 4,162.

“This will also expand JFC’s geographical presence from 16 countries to 21 adding Costa Rica, Egypt, El Salvador, United Kingdom, and Panama,” the company said.

JFC will change Smashburger’s debt structure to reduce its financing costs covering an $-million loan and enable the business to make more investments for long-term growth.

Jollibee disclosed that it executed a commitment letter to provide Smashburger with financing for the $80-million obligation maturing on May 15, 2018 and replace it with a much lower cost of long-term financing with more lenient terms.

JFC said it will borrow long-term loans from banks or issue loan guarantees on behalf of Smashburger to implement the plan.

“A much lower cost long-term financing, made possible by JFC’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,” JFC chief financial officer YsmaeI Baysa said.

“Smashburger has positive EBITDA (earnings before interest, taxes, depreciation and amortization). We look forward to the business making positive net income contribution to JFC’s profit in the medium-term and significant profit contribution in the long-term,” Baysa noted.

JFC reported a P1.821-billion net income in 2017, up 8.3 percent year-on-year, driven by double-digit sales. —Ted Cordero/VDS, GMA News