Jollibee to buy into US hamburger chain for $99M

(Updated 11:32 p.m.) Jollibee Foods Corp. (JFC) is acquiring a substantial stake in the US company that owns, operates and franchises restaurants operating under the trade name Smashburger.

 

Through its wholly-owned subsidiary Bee Good! Inc., homegrown Jollibee has entered into an agreement with Smashburger Master LLC to acquire 40 percent of SJBF LLC, according to a disclosure with the Philippine Stock Exchange on Tuesday.

 

"This acquisition will make JFC's presence in the US more significant, going beyond the Filipino market and serving the mainstream consumers in the $100 billion US burger market," the company said.

"This will indeed give them the chance to expand in the US, although – unfortunately – not through the Jollibee brand," Luis Limlingan, business development head at Regina Capital Development Corp., told GMA News Online.

 

Bee Good! will acquire 40 Class A units representing 40 percent of the outstanding membership interests in SJBF for around $99 million. The company will settle the purchase price in cash at the closing of the transaction.

 

The price is based on a $335 million enterprise value and $248 million equity value of SJBF. The transaction is expected to be completed within the year, subject to the fulfillment of certain conditions.

 

As limited liability companies, Smashburger and SJBF have a different capital structure from a simple corporation. The equity interests of an LLC are called membership interests and Class A units are the equivalent of common stocks.

 

The agreement outlines a mechanism for Bee Good! to purchase an additional 35 percent of Smashburger between 2018 and 2021 and the remaining stake between 2019 and 2026. The purchase price will be based on the US company's financial performance. 

 

Smashburger has 339 restaurants in 35 US states and seven foreign markets. The Denver, Colorado-based company estimates system-wide sales of $339 million this year or about 12 percent of Jollibee's estimated worldwide sales. 

 

"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 approximately 20 percent," JFC noted.