Jollibee Foods Corporation (JFC), one of the largest Asian food service companies, continues to perk up its coffee business with the planned acquisition of a majority stake in “most loved South Korean value coffee brand” Compose Coffee Co. Ltd. for $340 million.
In a disclosure to the Philippine Stock Exchange (PSE), JFC said it has signed definitive agreements, under which its wholly owned subsidiary Jollibee Worldwide Pte. Ltd. (JWPL) shall acquire a majority shareholding of effectively 70 percent in Compose Coffee and JMCF Co. Ltd., collectively called Compose Coffee.
The remaining shareholdings shall be held by Titan Dining II LP (Titan Fund II), which is 90 percent owned by JFC, and Elevation Equity Partners Korea Limited, with effective shareholdings of five percent and 25 percent, respectively.
“The business that Compose Coffee has built in the past 10 years is impressive and we are excited to play a major role in its next phase of growth,” said JFC Chairman Tony Tan Caktiong.
He added that “we believe that Compose Coffee is a compelling strategic fit for JFC and is on track to becoming the largest, fastest growing and leading value coffee player in South Korea.”
“Together with Elevation and Titan Fund II, we look forward to working with the Compose Coffee’s accomplished management team to further accelerate the company’s growth in existing and new markets and capture the significant whitespace in South Korea’s value coffee market,” noted Tan Caktiong.
Elevation’s Managing Partner Gordon Cho said “we are delighted to enter this partnership with JFC. We believe that JFC’s resources and expertise in F&B brand development combined with Elevation’s entrepreneurial mindset and local market expertise in value coffee will provide synergies in securing a sustainable future for Compose Coffee that will enable it to grow for many years to come.”
Compose Coffee and its roasting facility JMCF Co. Ltd. were founded in Busan in 2014. It is one of South Korea’s leading coffee franchise in the fast-growing value coffee segment with over 2,600 stores in the country as of June 2024.
Elevation is a private equity firm focusing on mid-market buyouts and growth capital opportunities in the consumer space in Korea and the rest of Asia.
Titan Fund II is focused on strategic investments in food and beverage concepts with the objective to further grow in Asia Pacific food service brands and bring strong global food service brands to Asia Pacific.
Compose Coffee ranks first in the industry for having the highest growth rate in the number of franchised stores and in terms of brand satisfaction among Korean coffee brands.
Its 100 percent franchised stores are fully supported by Compose Coffee’s largest in-house coffee roasting plant in Korea, enabling the provision and distribution of high-quality, specialty beans at low cost.
JFC said Compose Coffee is on track to be the largest, fastest growing and leading value coffee player in South Korea.
The total consideration of $340 million for the acquisition is at around 8 times EV/EBITDA multiple on a debt-free basis and cash accretive position. JFC said it closed this deal at a more favorable transaction multiple compared to average EV/EBITDA multiple in the coffee industry.
JFC noted that Compose Coffee has a debt-free balance sheet, superior cash returns and excellent profitability margins, evidenced by its high double-digit Earnings before Interests, Taxes and Depreciation and Amortization (EBITDA) and EBIT margins due to its capital-light, 100 percent franchised business model.
Compose Coffee will be consolidated into JFC’s financial statements immediately upon completion of the acquisition, with an estimated uplift of two percent in revenues bringing the international business’ contribution to 41 percent of global revenues, 12 percent in EBIT in 2024 and 34 percent in store count (2,600 stores).
Compose Coffee will be JFC’s biggest brand in terms of number of stores. It will bring JFC’s store network closer to 10,000 stores, more than 66 percent of which will be outside the Philippines. It will also further strengthen JFC’s Balance Sheet since it has no existing loans nor non-trade obligations.
JFC said this acquisition is aligned with its commitment to the Coffee and Tea Segment and franchising initiatives.
“This strategic, rapid growth, financially lucrative investment serves as JFC’s gateway in unlocking the fast-growing international value coffee market in South Korea which ranks third globally in terms of coffee consumption per capita,” JFC said.