What: Leading pizza chain business Domino's Pizza Enterprises Ltd (ASX: DMP) has announced the expansion of its operations into Germany.
The details of the strategic move include three key details –
- The formation of a two-thirds owned joint venture (JV) with the UK-listed Domino's Pizza Group plc regarding their Master Franchise Agreement for Germany
- The newly-formed JV to acquire Joey's Pizza, the largest pizza delivery chain in Germany by network sales and number of stores for up to €79 million depending on earn-out criteria being met
- The JV to acquire between 10 and 15 Domino's branded stores in Germany for approximately €2 million to €3 million
So What: The announced acquisitions will provide immediate scale for Domino's Pizza Enterprises in the German market which according to the group is the fourth-largest pizza market in the world.
Importantly, Germany is believed to be underpenetrated in terms of pizza stores which should provide the company with substantial store rollout potential.
The acquisitions also expand the group's footprint in Europe to four countries namely, France, Netherlands, Belgium and Germany. It also expands its current European store numbers from 551 to 773.
Now What: Management has provided guidance that these transactions are expected to be immediately 4% to 5% earnings per share accretive on an underlying, full year pro forma 2015 financial year basis.
The announcement also contained upgraded earnings before interest, tax, depreciation and amortisation (EBITDA) and underlying net profit after tax (NPAT) guidance for 30% growth, assuming the transactions are completed early in 2016.
