Shares in Domino’s Pizza Enterprises (DMP) surged to a new all time high during trading yesterday before falling back as investors checked their initial enthusiasm for another big buy in the European fast food sector.
The shares surged more than 12% to touch $56.17, the highest they have been, before selling off to end around $53.90 – still up more than 9%.
The catalyst for the market action (besides the enormous relief rally which took the ASX 200 up nearly 2% ahead of the Fed rate decision this morning) was news of a joint venture with UK-listed Domino’s Pizza Group to acquire Joey’s, a German pizza chain, in a deal worth 79 million euros (around $A120 million).
Also helping lift the share price was Domino’s Pizza also upgrading its earnings guidance for the second time in a month.
DMP 1Y – Domino’s gobbles up German chain
The Joey’s deal is the second deal in Europe in two months – back in October it bought France’s Pizza Sprint for 35 million Euros.
The total price for Joey’s comprises an upfront payment of 45 million euros and up to an additional 34 million euros based on performance.
Joey’s is the largest pizza delivery chain in Germany, with 212 stores and 143 million euros in sales. Domino’s says Germany is the world’s 4th largest pizza market.
The Australian Domino’s will own 66% of Joey’s and the UK company will own the remaining one third.
Domino’s said Joey’s is expected to generate 7 million euros in earnings before interest, tax, depreciation and amortisation (EBITDA) in the 2015 calendar year, so the impact on financial year 2016 earnings will be modest, but the deal will immediately add to earnings per share.
Domino’s also said that its underlying EBITDA and underlying net profit after tax to grow by 30% in the year to next June, contingent on both the Fench and German deals being completed early in the year. Last month the company upgraded its growth guidance to 25% from 20%.
