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One of Australia's top fund managers, Hamish Douglass and his Magellan Financial Group (ASX: MFG), has taken a big bite out of Mexican food chain Guzman y Gomez (GYG) after agreeing to pay $86.8 million for a 10 per cent stake.
The deal effectively places the market value of GYG, one of Australia's fastest-growing fast-food companies, at close to $900 million and sets the group up for further expansion globally.
The Sydney-centric investment in GYG was accompanied by news that a group of 40 high-profile athletes will also join the company's share register through Athletic Ventures, founded by Aussie rules footballer Matt de Boer, of the GWS Giants.
Athletic Ventures has been offered an undisclosed shareholding on the same commercial terms as Magellan.
GYG was established by Steven Marks in 2006 and has 147 restaurants in Australia, Singapore, Japan and the US. Most of the outlets are franchises.
The Magellan deal comes on the heels of rumours earlier this year that GYG is planning an IPO in 2021, with some sources valuing the group then at $500 million. The acquisition by Magellan has blown that valuation out of the water.
Magellan's position in GYG has further bolstered speculation that an ASX listing may still be on the cards. That view is furthered by the knowledge that Marks was once a hedge-fund manager based in New York prior to building the GYG brand.
"We are incredibly excited to welcome Magellan to the GYG family," says Marks.
"Our ambition is to be the best restaurant company in the world and, to achieve that, we need the support of the best partners and strongest board.
"Magellan's global experience and track record in the quick-service restaurant space is truly world class and we could not think of a better qualified or more aligned partner to have alongside us as we enter the next, most exciting phase of the GYG journey."
The Sydney-based Magellan has more than $100 billion in funds under management and its global fund with a portfolio of 25 of the world's biggest companies, including Facebook and Microsoft, has returned more than 9 per cent a year since inception in 2007.
"Magellan has deep investment experience in the quick-service restaurant industry and we believe Magellan can both add and gain considerable insights as a major investor and supportive shareholder," says Douglass.
"GYG is a world-class business with enormous growth potential and represents a highly attractive investment opportunity for our Principal Investments business."
Douglass has a vested interest in the performance of his company's investments. The billionaire is Magellan's largest shareholder with a 12.19 per cent stake.
Magellan's cash acquisition of GYG is subject to shareholder approval, expected to be sought at the end of January.
The investment will form part of Magellan's Principal Investments business, although it says it will have any day-to-day involvement in the business.
Magellan's head of governance and advisory, Craig Wright, will be appointed as a non-executive director on the GYG board which is chaired by Guy Russo, a former CEO of McDonald's Australia.
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