Australian-listed pizza company, Domino’s (DMP) will spend more than $235 million to take over its Japanese-based sister company after reporting a solid 2012-13 result and lifting dividend.
The company told the ASX yesterday that it will buy a 75% stake in Domino’s Pizza Japan from Bain Capital Domino Hong Kong for 12 billion yen (around $135.6 million).
The company will also provide nine billion yen of new debt funding, or around $100 million.
The company shares were suspended yesterday until Friday to allow a capital raising to be conducted to pay for the move north. The shares last traded at $11.82.
The purchase will add Japan to New Zealand, France, Belgium and the Netherlands as Dominos offshore markets.
Domino’s pushed net profit up 6% to $28.6 million for the 2012-13 financial year with a 13% rise in underlying earnings to $30.4 million.
The profit was struck on sales of $848.6 million for year, up 5.4%.
But same store sales rose at a much slower (and closer to inflation) 2%, meaning Dominos held prices and trimmed costs to boost earnings growth much faster than the rise in sales.
DMP 1Y – Domino’s targets Japanese market
CEO Don Meij said, ‘‘Our solid performance for the 2013 full year is the result of product innovation, rolling out new products including the biggest product launch in 20 years with the addition of our new Chefs Best range."
He said the company expects to lift earnings by 15% in the 2013-14 financial year and open between 70 and 80 new stores globally during that time.
The Company will pay shareholders a fully-franked final dividend of 15.4c per share, in addition to the interim dividend of 15.5c per share. This brings the full year dividend to 30.9c, up 14% from the 27.1c a share paid for 2011-12.
In addition to the dividends, Dominos said the $30 million capital return made to shareholders during the year to June, brought the total return to shareholders in the year to 73.7c a share.
Mr Meij said the move into Japan would expand the company’s network and provide it with further growth opportunities.
‘‘The acquisition represents an exciting opportunity to leverage our proven track record of successfully growing the Domino’s network to deliver shareholder value,’’ he said in a statement.
‘‘Japan is a strategic location for DPE’s future expansion, providing access to a large market which is well suited to significant new store roll-outs and the relocation of stores to higher traffic locations with improved image and formats.’’
DPJ is the third largest pizza delivery chain in Japan with 259 stores, comprising 216 corporate stores and 43 franchise stores. DPJ operates under a 20 year Master Franchise Agreement with Domino’s Pizza Inc. that commenced in March 2011, with an option to extend for a further 10 years.
Mr Meij said in yesterday’s statement that the acquisition represents an exciting opportunity to leverage the proven track record of successfully growing the Domino’s network to deliver shareholder value.
“We look forward to the ability to introduce DMP’s product expertise, innovation and digital leadership to Japanese customers. The acquisition increases DMP’s total store network to over 1,200 stores, further cementing DPE as the leading international Domino’s franchisee,” Mr Meiji said.
