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 At P3B, Jollibee takes control of Mang Inasal

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PostSubject: At P3B, Jollibee takes control of Mang Inasal    Tue Oct 19, 2010 9:24 am

JOLLIBEE Foods Corp. (JFC) is taking control of the Mang Inasal grilled chicken chain for about P3 billion in what analysts are calling both an expansionary and defensive play on the part of the homegrown fast-food giant.

The move also comes as Mang Inasal Philippines Inc., established by entrepreneur Edgar “Injap” Sia II in 2003, is gearing up for its initial public offering (IPO) as early as next year, which would arm it with additional funds to further its expansion in the quick-service restaurant sector dominated by JFC.

JFC disclosed to the local stock exchange on Monday the terms of its unsolicited proposal to acquire 70 percent of Mang Inasal Philippines, which has been “unconditionally and irrevocably” accepted by Sia’s holding firm Injap Investments Inc.

Following the share-purchase agreement 30 days after a due diligence period, JFC will own 70 percent of Mang Inasal, with the remainder held by Injap Investments. JFC said it will forward P200 million as initial payment, with the remainder to be paid over three years.

On an annual basis, JFC’s acquisition is expected to add 5 percent to its revenues and 7 percent to net operating income. The company’s first-half profit grew almost a 10th to P1.43 billion, as revenues rose 10.5 percent to P25.64 billion compared with the same period last year.

Francisco Liboro, president at PCCI Securities Brokers Corp., noted that it is “logical” for JFC to acquire control of Mang Inasal apart from its strong financial figures given the latter’s plan to go public.  

Mang Inasal, which currently has 303 stores, of which 24 are company-owned, has estimated annual revenues of P2.6 billion and system- wide sales of P3.8 billion.

“For Jollibee to buy that block, it is also a defensive measure. It’s better to [acquire Mang Inasal] than have a listed competitor,” Liboro noted, adding  that it is unlikely that Mang Inasal will take the IPO route anytime soon.

This, as the company typically keeps its restaurant units, including Chowking, Greenwich and Red Ribbon, privately held.

“For Jollibee, this is good.  But for the market, it may take away a potentially good issue,” Liboro noted. “Mang Inasal has good numbers, and I think it will continue to post good numbers.”

BDO Capital & Investment Corp. president Eduardo Francisco separately said the acquisition will lessen the “urgency” for an IPO, given JFC’s financial resources.  

In an interview last year, Sia said the IPO would help Mang Inasal open more company-owned stores until 2012. He said Mang Inasal also expects to have 500 branches in two years.  

Maria Arlysa Narciso, an investment analyst with AB Capital Securities  Inc., said JFC’s stock will likely be reevaluated to take into the account its latest move. JFC shares jumped 8 percent to P97 apiece on Monday’s close.

“Jollibee is known to acquire companies that have a lot of growth potential, and we think Mang Inasal has this potential when combined with the expertise of Jollibee,” she said in a phone interview on Monday.

JFC said on Monday the financial due diligence is being handled by Pricewaterhouse Coopers-Isla Lipana and Co., with the legal aspects led by Romulo Mabanta Buenaventura Sayoc and De Loz Angeles.

Sia opened the first Mang Inasal branch seven years ago in Iloilo City. The chain has since grown to its present size and in varied locations in the country from Baguio, Cagayan de Oro, Metro Manila, Cebu, Boracay, Palawan, General Santos, Davao and Tacloban.

The JFC Group is considered the largest-fast food network in the country, with 1,582 stores by the first half of the year. It also has 362 stores abroad, including Chinese brands Yonghe King and Hong Zhuang Yuan, apart from its core brands.  

Jollibee recently announced a plan to terminate its café chain Delifrance to focus on building larger fast-food businesses.

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