Jollibee to Invest $100M for the Acquisition of The Coffee Bean & Tea Leaf Brand

Jollibee Foods Corp. (PSE: JFC), one of Asia’s largest food service companies, disclosed today that through its wholly owned subsidiary Jollibee Worldwide Pte Ltd (JWPL, Singapore), it entered into an agreement to invest USD100 million in a new Singapore-based holding company to acquire 100% of The Coffee Bean & Tea Leaf specialty coffee and tea brand (CBTL), based in Los Angeles, California, USA. The acquiring entity will be JWPL’s wholly owned subsidiary of the new holding company.

The Coffee Bean & Tea Leaf is a coffee and tea shop chain owned by International Coffee & Tea LLC based in Los Angeles, California. Founded in 1963, CBTL as at end of 2018, had 1,189 outlets (company owned 336, franchised 853), of which 284 are in the US, 447 in Southeast Asia (Philippines 139, Indonesia 101, Malaysia 99, Singapore 61), 336 in other Asian countries (South Korea 292), and 122 in other regions (Kuwait 36, Qatar 28, India 27). Total revenue in 2018 was $313 million. Total EBITDA was $23.7 million, as calculated by Jollibee based on the 2018 Audited Financial Statements of International Coffee & Tea LLC and Subsidiaries.

CBTL uses only hand-roasted coffee beans and hand-blended teas from farms in various countries like Costa Rica, Colombia, Kenya, Indonesia, Jamaica, Thailand and Sri-Lanka. The company is known for its original Ice Blended coffee and tea drinks, hot coffee drinks and hot and iced tea drinks. It also sells a variety of whole bean coffees, whole leaf teas, flavored powders and baked food.

Jollibee Foods Chairman Tony Tan Caktiong gave the following statement: “The acquisition of The Coffee Bean & Tea Leaf brand will be JFC’s largest and most multinational so far, with business presence in 27 countries. This will add 14% to its global system wide sales, 26% to its total store network, will bring international business’ contribution to 36% of worldwide sales and will bring JFC closer to its vision to be one of the top 5 restaurant companies in the world in terms of market capitalization. Combined with Highlands Coffee, with business mostly in Vietnam, this acquisition will enable JFC to become an important player in the large, fast growing and profitable coffee business, which will account for 14% of JFC’s worldwide system sales. Our priority is to accelerate the growth of The Coffee Bean and Tea Leaf brand particularly in Asia, by strengthening its brand development, marketing and franchise support system.”

The total consideration for this acquisition is $350 million on a debt-free basis (the acquired business will have no debt upon acquisition). Initially, JFC through JWPL will finance the entire acquisition through a bridge loan. JFC’s $100 million investment will represent 80% of the equity of the holding company (CBTL will be consolidated into JFC’s financial statements immediately upon acquisition) with the balance of $250 million as advances to the new holding company. This holding company plans to issue within six to nine months preferred shares (on terms to be determined) for an aggregate consideration of at least $250 million, which will be used to repay JFC’s advances.

Members of the family that owns Viet Thai International Joint Stock Company (VTI), JFC’s partner in the Superfoods Group of business which owns and operates Highlands Coffee and Pho 24 with business mainly in Vietnam, will subscribe to the capital of the new holding company with an equity share of 20%. The holding company is planned for initial public offering (IPO) in three to five years.

Highlands Coffee as of the end of 2018 has 317 stores (275 in Vietnam, 42 in the Philippines) with sales growth of 32%. It is profitable and generates one of the highest returns on investments on new stores in the JFC system. It plans to open and least 200 new stores in 2019, mostly in Vietnam.

The initial public offering of Highlands Coffee which was planned for July 2019 per the agreement between JFC and VTI is being delayed and re-studied in the light of the acquisition of CTBL.

The current owners of International Coffee & Tea LLC are Advent Coffee Holdings Corp., Alexandria II Corp., CBTL Holdings Corp. The Sassoon Group LLC and ICT Incentive Holdings LLC.

JFC operates the largest food service network in the Philippines. As of June 30, it was operating 3,195 restaurant outlets in the country: Jollibbe brand 1,163, Chowking 590, Greenwich 284, Red Ribbon 479, Mang Inasal 577, Burger King 101 and PHO24 1. Abroad, it was operating 1,418 stores: Yonghje King (China) 323, Hong Zhuang Yuan (China) 45, Dunkin Donuts (China) 9, Jollibee 238 (Vietnam 118, Brunei 17, Hong Kong 8, Singapore 7, Macau 1, Malaysia 1, United States 37, Canada 4, Saudi Arabia 13, UAE 14, Qatar 7, Kuwait 3, and Saudi Arabia 2), Highlands Coffee 340 (Vietnam 297, and Philippines 43). PHO24 34 (Vietnam 18, Indonesia 16), Hard Rock Cafe (Vietnam 2, Hong Kong 3, and Micau 1); and Smashburger 345. The JFC Group’s Worldwide store network reached 4,613 stores.