Domino’s Pizza has pressed go on a $165 million equity capital raising to take full control of its German joint venture operations as the fast-food operator expands its global footprint.
The company put its shares in a trading halt on Thursday morning before markets opened, with Domino’s Group CEO Don Meij saying the fresh funding would feed the business’ appetite for offshore expansion.
“We are excited about increasing our ownership in Domino’s Pizza Germany, which has been an objective of ours since entering the market. Germany offers strong long-term growth prospects for our business,” he said.
Domino’s is the dominant pizza chain in Germany, especially after its acquisition of independent chain Hallo Pizza brought its store count from 200 stores to more than 300. The German business is jointly owned between Domino’s Pizza Enterprises in Australia and Domino’s Pizza Group plc, a UK-based master franchise of the chain that is listed on the London Stock Exchange.
Domino’s Pizza is looking to raise up to $165 million.Credit:Rob Homer
The equity capital raising will involve a fully underwritten institutional placement to raise $150 million after which the company would issue 2.3 million new shares – 2.7 per cent of the company’s existing number of shares – at $65.05 a share, a 2 per cent discount on Wednesday’s closing price of $66.38.
Domino’s hopes to raise a further $15 million through a non-underwritten share purchase plan, under which eligible shareholders can apply for up to $30,000 of new shares at a 2 per cent discount on the closing price of the last day of the plan, expected to be December 22.
Domino’s will make further details available to shareholders in a week’s time.
The $20.2 billion American pizza giant has the exclusive master franchise rights for the brand not just in Australia, but in New Zealand, Belgium, France, The Netherlands, Japan, Germany, Luxembourg, Denmark and Taiwan. It recently added Malaysia and Singapore to that list, with Cambodia expected to become part of the portfolio in the first quarter of 2023.
Acquisition of these Asian markets has bulked out Domino’s debt to $635 million.
The trading halt will be lifted and the $150 million institutional placement will be completed on Friday.
The company on Thursday reaffirmed its trading guidance, provided at its early November AGM, where it outlined “materially lower” earnings for the first half of 2023 compared to the previous corresponding period. Net profits for fiscal 2023 would be weighed down by $35 million due to a number of headwinds, including inflation and foreign exchange.
Domino’s Pizza Enterprises’ fiscal 2022 underlying net profits fell 12.5 per cent to $165 million, weighed down by lockdowns in France and Japan.
Meij said that he expected inflation pressures to simmer down, but said the business would continue to raise prices anyway to boost margins. In July, Domino’s introduced a 6 per cent delivery fee for Australian customers amid rising food and fuel costs.
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