Domino’s Pizza buys German, Asian businesses for $150m
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Domino’s Pizza Enterprises is raising to $165 million in fresh capital as it moves to full ownership of its pizza business in Germany, seven years after it made a foray into that market in a joint venture with its British stablemate.
The Australian-listed pizza group made an original buyout of Joey’s Pizza chain in Germany in 2015 in conjunction with a British Domino’s Pizza entity. That joint venture followed up in 2017 with the acquisition of Hallo Pizza in Germany.
The Australian-listed business is now buying out the remaining one-third of the joint venture entity, with funds raised via a $150 million placement and a $15 million share purchase plan.
There are 412 Domino’s outlets in Germany, where soaring energy costs significantly drag the economy because of its dependence on gas from Russia. That has been upended after the Russian invasion of Ukraine.
Chief executive Don Meij said on Thursday that Germany offered long-term solid growth prospects. In the short term, the company was trying to emphasize the value of its pizza meal offers, positioning them as cheaper for a family of four than burger and chicken chains.
At its annual meeting, the broader group warned a month ago that overall profits in the first half would be “materially lower” than a year ago.
Mr. Meij said on Thursday there had been little change in trading conditions since the trading update on November 2. “The business continues to track to plan,” he said.
The final price in the placement will be determined via a book build, but there is an underwritten floor price of $65.05. This compares with a closing price of $66.38 on November 30. Domino’s shares went to a trading halt on Thursday.
The company’s shares were trading at $164 in mid-September last year before inflation started to rise and input costs jumped.
In August, the company expanded in Asia with the acquisition of 287 stores in Malaysia, Singapore and Cambodia in a deal with an upfront price of $214 million, in what was the biggest acquisition in the company’s history. The Malaysia, Singapore and Cambodia businesses had also been trading in line with expectations, the company said.
The capital raising comes after Domino’s outlined three weeks ago that it had received an option exercise notice from Domino’s Pizza Group Plc requiring the purchase of all of its shares in the German joint venture.
Questions & Answers
Q.Why is Domino’s Pizza Enterprises raising fresh capital?
Why is Domino’s Pizza Enterprises raising fresh capital?
The company is raising $165 million in fresh capital to fund the full ownership of its pizza business in Germany. This includes buying out the remaining one-third of a joint venture entity there.
Q.What is the current state of Domino's trading conditions?
What is the current state of Domino's trading conditions?
Trading conditions have seen little change since a November 2 update, with the business tracking to plan. However, the broader group warned a month ago that first-half profits would be materially lower than last year.
Q.What was the biggest acquisition in the company’s history?
What was the biggest acquisition in the company’s history?
The biggest acquisition was in August when the company expanded in Asia, acquiring 287 stores in Malaysia, Singapore, and Cambodia. This deal had an upfront price of $214 million.
Q.How do soaring energy costs impact the German market for Domino's?
How do soaring energy costs impact the German market for Domino's?
Soaring energy costs significantly drag the German economy due to its dependence on Russian gas, which has been upended. Despite this, the CEO believes Germany offers long-term solid growth prospects for Domino's.
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