Domino’s Pizza Enterprises to acquire 75 per cent in Domino’s Japan

Posted by AFN Staff Writers on 26th August 2013

Australian pizza restaurant company Domino’s Pizza Enterprises (DPE) has announced it has entered into an agreement with asset management firm Bain Capital to acquire a 75 per cent equity interest in Domino’s Pizza Japan (DPJ).

The agreement includes a new debt of approximately ¥9.0 billion (A$101 million). DPE said this price is equivalent to a ¥25.0 billion (A$282 million3) enterprise value on a 100 per cent basis. DPJ is the third largest pizza delivery chain in Japan with 259 stores, comprising 216 corporate stores and 43 franchise stores as at 30 June 2013. DPJ operates under a 20 year Master Franchise Agreement with Domino’s Pizza Inc. The agreement expires on 31 March 2031, with an option to extend for a further 10 years at DPJ’s discretion.

DPE said the acquisition will bring with it an established franchise, which is complimentary to DPE’s current portfolio of territories. The Company said the acquisition also “represents a new pillar of growth for DPE given the meaningful store rollout opportunity”.

“The acquisition represents an exciting opportunity to leverage our proven track record of successfully growing the Domino’s network to deliver shareholder value,” said Don Meij, DPE Managing Director and CEO.

“Japan is a strategic location for DPE’s future expansion, providing access to a large market which is well suited to significant new store rollouts and the relocation of stores to higher traffic locations with improved image and formats,” Mr Meij said.

DPE said the acquisition increases its total store network to over 1,200 stores. The current DPJ management team have committed to remain with the Company.

Partnership with Bain Capital

Bain Capital, the current owner of DPJ, has a long history of investing in Domino’s both in the US (as a former owner of Domino’s Pizza Inc.) and in Japan (through investment in DPJ). The Company also has investments in Skylark restaurants in Japan, which DPE said means it has an “intimate knowledge of the Japanese fast food and restaurant sector”.

Under the agreement, DPE will have full operating control of DPF, subject to some minority rights for Bain Capital. The agreement also contains an exit mechanism with respect to Bain Capital’s residual 25 per cent interest in DPJ, proving DPE with the ability to obtain full ownership of DPJ at a future date whilst also outlining clearly defined exit rights for Bain Capital.

DPE full year results

DPE also announced its financial results for the full year to 30 June 2013, reporting an underlying Net Profit After Tax of A$30.4 million and an underlying EBITDA of A$55.9 million. The year’s profit was generated on Total Network Sales of A$848.6 million and Same Store Sales growth of 2 per cent on 2012.