Domino's Pizza SG and MY business acquired by wider group

Domino’s Pizza Malaysia, Singapore and Cambodia will join the wider Domino's group outside of the US via an acquisition by Australian-based Domino’s Pizza Enterprises (DPE) for approximately US$148,923,670, which Domino’s will fund through cash and debt facilities. Following the acquisition, the new markets will be led by Ringo Joannes, DPE regional CEO, a former multi-unit franchisee who has overseen the Belgian business since 2019, expanding the Belgium/Luxembourg network from 87 stores to 140 stores.

Meanwhile, current goup CEO of Domino's in Malaysia and Singapore Ba U Shan-Ting will consult to deliver his local market insights to augment DPE’s leadership for the next several years on franchising establishment, shared services and overhead integration. There will be no changes to its marketing and communications teams. According to DPE, the acquisition will further cement its position in Asia, where the company has been expanding its store footprint through franchised and corporate stores in Japan and Taiwan. The transaction is said to be the largest single acquisition of stores in the company’s history.

"I am excited to have this opportunity to work with team members in these new markets, and to provide them with the opportunity to become franchisees for the first time. This is an opportunity for DPE, and for me, and I’m looking forward to showing our customers and our team what is possible as we invest to reach our potential,” Joannes added.

Group CEO and managing director Don Meij said the acquisition demonstrated the value of the company’s twin-region focus, Europe and APAC, with the Asia Pacific now serving a population of more than 230 million people. Domino’s had carefully reviewed the potential for the new markets and intended to apply proven expertise from the company’s other ten markets to accelerate performance. Domino’s Pizza is the second largest pizza chain by store count behind Pizza Hut in the three regions.

"DPE has never entered a market as number one, nor do we impose our flavour preferences on a new market. Instead, by listening to our customers and exceeding their expectations with world-class operations – built on safe, fast, affordable delivery – we have built a leadership position and provided a pathway to success for franchises, team members, and their families," Meij said.

Josh Kilimnik, Domino's Pizza CEO Asia/Pacific said management intended to apply proven strategies in these newest markets. He also thanked the founders of the business, Ting Yew Tong as well as other business partners, for their successes in creating a path for Domino’s across multiple markets, introducing Domino’s (and indeed pizza) to new customers. "DPE will build on these solid foundations, applying our high volume mentality with team members in stores to remove barriers to increasing per-store sales and profits,” Kilimik explained.

The transaction has the full support of the master franchisor, Domino’s Pizza Inc., who has made a commitment to enter into new master franchise agreements for each territory with DPE with a term of 15 years with a further 10-year renewal period. The acquisition is scheduled for completion at the end of the first half of FY23, subject to the satisfaction of conditions precedent and local regulatory approvals. Due to the different regulatory and procedural requirements in each of the territories, transaction documentation contemplates that the acquisition of the Malaysian and Singapore territories may conclude prior to the completion of the acquisition of the smaller Cambodian business.

Investments in digital and to align operating platforms to the broader DPE network are expected to be made during the FY23 year with EBITDA expected to be mildly lower than in FY22. Synergies are expected to be delivered over time, including those resulting from digital investment, improved effectiveness of operations, store count growth and reinvestment of capital into developing significant franchise operations as was the case in the Japan business.

The final purchase price is subject to an earn-out over the next two to three years based on a mechanism that capitalises earnings at an 11 times adjusted EBITDA pre-IFRS16 multiple which is measured as an average over a trailing two-year period. The maximum earn-out is about US$98 million. The earn-out recognises current business volatility and has allowed DPE to acquire the territories earlier than otherwise would have been the case.

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