Domino's Pizza Enterprises (ASX: DMP) is expanding its Asian presence following the $79 million acquisition of 157 Domino's stores in Taiwan, with a long-term plan to more than double the scale of the local operation.
The acquisition of Formosa International Hotels Corporation's fully owned subsidiary PizzaVest Company gives the Brisbane-based DMP its 10th global market.
It also paves the way for an increase in the company's expected store count in Asia from 1,500 to 1,900 by 2032.
The acquisition is being funded from Domino's existing cash and debt facilities, with the company planning to invest in upgrading the Taiwan network's IT, infrastructure and management resources in the first few years.
The company is expecting the acquisition to provide earnings per share accretion of 2 per cent on an FY20 pro-forma basis, although this is before integration and transaction costs.
Domino's CEO Don Meij sees significant upside for the Taiwan business which is the second-largest pizza chain in the country by store count and sales volume.
"We intend to expand the store footprint through opening more corporate stores, introducing new, internal, franchisees to the network, helping existing franchisees profitably expand their businesses, and investing in the network and our people to drive long term growth," he says.
"This is a people-powered business, and although we may speak different languages, we all speak the language of pizza and customer service."
Domino's Taiwan currently has 138 franchised stores and 19 corporate stores located across all major cities. Domino's sees the potential to increase the store count to 400 over time.
The Taiwan business currently delivers annual sales of about NT$1.6 billion ($73 million) and EBITDA of NT$103 million ($4.8 million).
"This is a market with tremendous opportunity for our business and this acquisition provides similar opportunity for the local team," says Meij.
"Our expansion focus has been on identifying opportunities with large total addressable markets and a stable economy. We look forward to bringing our high-volume mentality to this business."
Domino's will pull the Taiwan operations under the umbrella of its operations in Japan, which are led by Josh Kilimnik.
The company is also aiming to benefit from regional procurement, supply chain and operation synergies in Taiwan by leveraging its existing capabilities in Japan.
Domino's was established in Taiwan in 1989 and was acquired by the Taiwan-listed Formosa International Hotels Corporation in 2007. The acquisition is expected to be completed in the first half of FY22.
The news was welcomed by investors who pushed Domino's shares up as much as 2.4 per cent in early trade.
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