Tuesday, October 19, 2010

Jollibee Acquires Mang Inasal for 3 Billion Pesos

IN THE NEWS from ABS-CBNnews.com

JFC's one week stock price and volume levels (number of shares traded). 
Notice the huge one-day jump in price and volume on October 18.

Weren't we just talking about this a few days ago? So it turns out that all those rumors were not complete fabrications, after all.

In a disclosure to the PSE, Jollibee Foods Corporation (JFC) said it is acquiring 70% of Mang Inasal. Of the estimated 3 billion peso transaction price, Jollibee has paid 200 million pesos to parent firm Injap Investments Inc., which will continue to hold 30% of Mang Inasal. Ninety-percent of the balance will be paid when the two parties sign a share purchase agreement, which is subject to a 30-day due diligence conducted by PriceWaterhouse Coopers-Isla Lipana & Co. auditing firm and Romulo Mabanta Sayoc De los Angeles law firm, and. The remaining 10% will be paid over 3 years.

Mang Inasal’s network will add about 5% to Jollibee’s worldwide systemwide sales, 5% to its revenues, and 7% to its operating income. Once completed, the deal will also increase Jollibee’s current 1,578 stores in the Philippines and 375 abroad by 16%.

Jollibee has recently sold its stake in Delifrance, a French pastry store that it acquired in 2006 and divested from two businesses in Taiwan and China in line with its thrust to concentrate on larger quick-service restaurant businesses.

At yesterday's trading, JFC's stock price jumped 8% to 97 pesos per share, raking in handsome profits to those who were "in the know" at least a day sooner than everyone else. I only found out about this late last night (thanks to Ange for the heads up), and the online press releases were only published late yesterday afternoon, way past trading hours. When did you guys find out about it in the Philippines? I smell some insider action going on. Do you?

The acquisition values Mang Inasal at roughly 4.3 billion pesos (at 3 billion pesos for 70% of the company, go do the math), just a tad short of Injap Sia's rumored counter offer of 5 billion pesos. Kudos to Mr. Sia for a job well done, with that IPO press release more than adequately stirring interest about everything Mang Inasal, and seemingly forcing Jollibee's hand into action. 3 billion pesos is a very handsome pay off, on top of the remaining 30% stake which provides Sia with a huge upside potential in case Mang Inasal continues its aggressive growth. Jollibee also looks to have profited nicely from the transaction, with the acquisition having increased the fast food giant's market capitalization by a whopping 7.4 billion pesos, overnight.

I will try to closely follow how things will go over the next several weeks. I'm particularly interested if the positive sentiments of investors regarding the purchase will continue and how the acquisition will affect Mang Inasal's operations, specifically in terms of product quality and overall customer experience. Since I was not able to patronize Mang Inasal before the takeover, maybe you guys can help me out with the latter. :)
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