Jollibee to acquire Korea’s Compose Coffee in $340 mn deal

Jollibee Foods Corp., the Philippines’ largest fast-food chain, is set to take over a majority stake in Compose Coffee Co., South Korea’s No. 3 coffeeshop operator, in a deal valuing the target at $340 million for global expansion.

Jollibee Foods said on Tuesday its wholly owned subsidiary Jollibee Worldwide Pte. will acquire a 70% stake in privately held Compose Coffee for $238 million. Titan Fund, in which Jollibee Worldwide has a majority stake, will take 5%, while private equity firm Elevation Equity Partners Korea Ltd. is poised to purchase the remaining 25%, according to the company.

“This acquisition is aligned with JFC’s commitment to coffee and tea segment and franchising initiatives,” its filing to the Philippine Stock Exchange said, referring to Jollibee Foods Corp.

“This strategic, rapid growth, financially lucrative investment serves as JFC’s gateway to unlocking the fast-growing international value coffee market in South Korea, which ranks third globally in terms of coffee consumption per capita,” said the company known for fried chicken.

The takeover of Compose Coffee with more than 2,600 branches in South Korea is expected to increase Jollibee Foods’ global network to 10,000 stores, more than 65% of which will be outside the Philippines, the company said.

DEBT-FREE BALANCE SHEET WITH 100% FRANCHISED BUSINESS MODEL

Compose Coffee’s branches are all franchised, providing the operator with a debt-free balance sheet, healthy cash returns and profit margins, Jollibee Foods said.

South Korea’s third-largest coffee chain after Ediya Coffee and Mega Coffee reported an operating profit of 36.7 billion won ($26.4 million) in 2023, up 47% from a year earlier, as sales grew 21% to 88.9 billion won. That resulted in an operating profit margin of 41.2%.

The takeover of Compose Coffee is expected to raise Jollibee Foods’ sales by 2% bringing the international business’ contribution to 41% of global revenue, the Philippine company said.

In 2019, Jollibee Foods spent $100 million to acquire loss-making Coffee Bean & Tea Leaf.

Compose Coffee, wholly owned by its founder Yang Jaeseok, had sought a buyer in 2022.

An official at the coffeeshop chain established in Busan, South Korea’s second-largest metropolitan area, declined to comment on the acquisition by Jollibee Foods.

Write to Ji-Yoon Yang at yang@hankyung.com
 
Jongwoo Cheon edited this article.