A day after wrapping up two new Asian territories as part of the biggest acquisition in its history, Domino’s Pizza Enterprises (ASX: DMP) is now seeking to raise $165 million to buy out its joint venture partner in Germany.
The fast-food group announced its intention in November to take up the option to acquire the Germany business from Domino's Pizza Group plc (DPG), the UK-based master franchise of the Domino’s brand.
Domino’s Pizza Enterprises has operated its German stores in a joint venture with DPG since 2015, and the Brisbane-based group has held an option to assume full control of the business. The company hinted at a potential capital raising last month after revealing it would proceed to full control of the German business.
The capital raising will comprise a $150 million fully underwritten institutional offer and a $15 million share purchase plan for existing eligible shareholders. The price of the institutional offer will be determined through a bookbuild to be completed today.
“We are excited about increasing our ownership in Domino’s Pizza Germany, which has been an objective of ours since entering the market,” says Domino’s CEO Don Meij.
“Germany offers strong long-term growth prospects for our business.”
Domino’s opened its 400th store in Germany in FY22, with the territory reported to have grown sales during the year amid supply change and labour challenges. The group has more than 1,400 stores in Europe, accounting for almost half of its 3,387 stores globally.
The company revealed at last month’s AGM that European markets experienced strong same-store sales, with all markets positive in October compared to the previous year.
“Germany, which has faced the most significant inflationary pressures with energy prices affected by conflict in Ukraine, has delivered positive same-store sales growth after passing through material pricing increases, including some additional service fees,” the company said.
Domino’s plans to apply part of the planned $165 million capital raising to retire debt which stood at $635 million and the end of June this year.
Meanwhile, Domino’s yesterday announced that it had completed the acquisition of Domino's Malaysia and Domino's Singapore, which was part of a $214 million buyout of three new Asian territories, including Cambodia, announced in August. It is the largest acquisition ever undertaken by the group.
The acquisition, which could be worth as much as $356 million if earn-out bonuses are achieved, almost doubles Domino’s Pizza Enterprises’ international footprint and boosts the company’s serviceable market in the Asia-Pacific region by 30 per cent to 234 million people.
The acquisition of Domino's Cambodia remains subject to regulatory approvals, which is expected to be secured in the first quarter of 2023.
Domino’s is expecting the German acquisition to be completed in the first half of calendar 2023.
The company also revealed today that the Malaysia, Singapore and Cambodia markets have been trading ‘in line with expectations’.
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