Jollibee acquires Mang Inasal for P3 billion

MANILA, Philippines - Jollibee Foods Corp. (JFC), the country’s largest fastfood chain, has taken over control of Mang Inasal, a highly successful Visayas-based reataurant chain specializing in grilled chicken, in a deal worth P3 billion.

In its disclosure to the Philippine Stock Exchange yesterday, JFC said it has submitted an unsolicited offer to acquire 70 percent of Mang Inasal Philippines Inc. (MIPI), which was unconditionally and irrevocably accepted by its parent company Injap Investments Inc.

The move is the latest in JFC’s continued growth trajectory through expansion and acquisitions, the most recent of which involved franchises based in China, Taiwan and South Korea.

Mang Inasal, a homegrown business, started as a single proprietorship in December 2003 by its founder Edgar “Injap” Sia II in Iloilo City, the first barbeque fastfood chain anchored by its flagship chicken inasal product.

MIPI, which has grown its branches to 303 stores nationwide, is in a positive net cash position, racking up total revenues of P2.6 billion and systemwide sales of P3.8 billion

JFC said it expects to finalize the deal within 30 days, subject to the completion of due diligence by Pricewaterhouse-Coopers-Isla Lipana & Co. and law firm Romulo Mabanta Buenaventura Sayoc and De los Angeles.

Sia will remain as a significant minority shareholder in MIPI with a remaining 30-percent stake.

As part of the transaction, JFC has made an initial P200-million payment to MIPI. About 90 percent of the purchase price (less the initial payment) will be paid on closing, with the remaining 10 percent settled over a period of three years from closing.

JFC said the purchase of Mang Inasal would add approximately five percent to its total worldwide systemwide annual sales, five percent to revenues and seven percent to net operating income.

Mang Inasal’s chain will also increase JFC’s store network in the Philippines by 19 percent and on a worldwide basis by 16 percent. Of the total Mang Inasal branches, 24 are company-owned while 279 are franchised.

The Jollibee Group already operates the most extensive fastfood network in the Philippines with a total of 1,578 stores: Jollibee (703), Chowking (404), Greenwich (218), Red Ribbon (215), Delifrance (23) and Manong Pepe’s (15).

On a global scale, JFC also has Jollibee, Red Ribbon and Chowking stores, along with Yonghe King and Hong Zhunag Yuan in the People’s Republic of China.

The group, which is building on strong growth by adding Mang Inasal to its growing plate, said it has sufficient financial resources to pay for the acquisition in cash generated from its operations.

“JFC will build shareholder value by growing the sales of Mang Inasal’s existing stores through the application of JFC’s knowledge of consumers and its available recipes and products, continued expansion of Mang Inasal’s store network, cost improvement on its raw materials and greater operational efficiency by applying JFC’s technology and scale,” the fastfood giant said.

JFC said it intends to keep MIPI’s current personnel, subject to their meeting the JFC Group’s organizational standards.

Industry analysts said the transaction was a wise move for Jollibee as it has successfully avoided growing cut-throat competition with Mang Inasal, the fastest-growing fastfood chain in the country which was earlier touted as the “new Jollibee” when it made plans to offer its shares to the public early this year.

“For the past few years, Mang Inasal has been giving Jollibee a run for its money. This move is definitely a wise one for a company always on the lookout for opportunities to grow further.   As the saying goes, if you can’t beat them, join them,” one analyst said.

JFC is eyeing a double-digit growth in sales and profit for the year with the opening of a total 200 new stores – 100 each both locally and overseas - to bring its total store network to 2,000 by yearend.

In the first half this year, the group posted flat earnings at P743 million compared with P746 million the previous level, largely due to foreign exchange losses.

Systemwide sales, which measures all sales to consumers both from company-owned and franchised stores, rose 10.6 percent to P17.57 billion, driven by a 5.7 percent hike in store network and a five percent rise in sales of stores that were at least one year old.