Jollibee to acquire Compose Coffee for P14B

Jollibee [JFC 226.20, up 0.4%; 12% avgVol] [link] will acquire South Korean coffee leader Compose Coffee Company (CCC) for $238 million (~P14 billion), in a deal that pegs CCC’s enterprise value at approximately $340 million (~P20 billion). Jollibee Worldwide will own a 70% stake in CCC, with Elevation Equity taking a 25% stake, and JFC’s Titan Fund II taking the remaining 5%. CCC has 2,470 franchised stores and a “debt-free balance sheet”. JFC said that CCC will be consolidated into its financials “immediately upon completion of the acquisition”; it estimates CCC’s inclusion to “uplift” revenues by 2% and push its total store count closer to its 10,000-store goal. According to JFC, South Korea “ranks 3rd globally in terms of coffee consumption per capita.”

MB bottom-line CCC is one of those fast-growing, low-cost coffee places that we’ve seen sprouting up all over the region, and its growth in South Korea is part of a coffee explosion that has attracted the attention of global coffee players like Tim Hortons and Peet’s Coffee. According to a BusinessKorea article, consumers’ preference for high-cost coffee like Starbucks “is maintaining”, whereas there is “continued growth” in the demand for “cost-effective chains” like Mega Coffee and CCC. JFC shareholders will like the debt-free nature of the deal, and they should love the instant exposure to an upscale growth market (once the deal completes). CCC has a huge physical footprint and a decently-sized digital one with over 11 million subscribers to its stand-alone app. Those are wonderful levers for JFC to work with. JFC is really leaning into the addictive liquids market, and as an admitted addict with a daily habit, I salute them. 

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