JOLLIBEE Foods Corp. (JFC) said it has completed the deal to increase its shareholdings in Denver, Colorado-headquartered Smashburger Master Llc. to a controlling stake as “the Filipino company with a smiling bee for a mascot” moved to refinance the debt of the American firm.
The company said it is buying an additional 45-percent stake in Smashburger in a deal worth $100 million, increasing its stake in the United States company to 85 percent, from the current 40 percent. The announcement comes nearly a month after it was reported in The Denver Post.
Jollibee said the purchase will now allow the fast-food company to consolidate Smashburger’s revenues into the company. The company does not include in its finances those firms that it only has a minority interest.
“The transaction… is expected to be completed in one to two months, subject to government approvals in the United States and meeting certain closing conditions,” Jollibee said.
The company added acquiring more shares in Smashburger will allow Jollibee to have a more significant business in the US, increasing the sales contribution from worldwide system-wide sales to 15 percent, from the present 5 percent, and the sales contribution from foreign business to worldwide system-wide sales from the present 20 percent to 30 percent.
The consolidation of Smashburger into Jollibee will increase its worldwide store network by 365 stores, or 9 percent, to 4,162. This will also expand Jollibee’s geographical presence from 16 countries to 21 adding Costa Rica, Egypt, El Salvador, the United Kingdom (England and Scotland) and Panama.
Jollibee, however, executed a commitment letter to SJBF Llc., the parent company of the entities comprising the Smashburger business, to provide financing so that SJBF Llc. can pay for an $80-million loan that falls due on May 15.
Jollibee said it wants to replace the loan with a much-lower cost of long-term financing at more lenient terms. Jollibee added it will borrow long-term loans from banks or issue loan guarantees to banks on behalf of Smashburger in order to implement this plan
“One of JFC’s priorities will be to change Smashburger’s debt structure…to significantly reduce its financing cost for its $80-million loan and enable the business to make more investments for long-term growth.”
“A much lower cost long-term financing, made possible by JFC’s strong balance sheet, will significantly improve the net income of Smashburger immediately. It will also enable Smashburger to make more meaningful investments for healthier and faster growth,” Jollibee’s CFO YsmaeI V. Baysa was quoted in a statement as saying.
“We look forward to the business making positive net-income contribution to JFC’s profit in the medium term and significant profit contribution in the long term,” Baysa added.