Jollibee shares fall after spending $350 million to buy Coffee Bean & Tea Leaf

Jollibee shares fell after the corporation spent $350 million on buying Coffee Bean &Tea Leaf (Source: Forbes Vietnam)

Jollibee will invest $100 million for an 80 per cent stake in a Singapore venture set up with Vietnamese partners to acquire Coffee Bean & Tea Leaf, it said in a stock exchange disclosure. The rest of the amount will be in the form of advances, according to Bloomberg.

In addition, the remaining 20 per cent of the Singaporean venture will be bought by Jollibee’s partner in Highlands Coffee and Pho 24, owners of Viet Thai International JSC.

In the statement, Jollibee also announced spending $250 million to pay part of Coffee Bean & Tea Leaf’s debt.

Jollibee investors seem to be unsatisfied with this decision. The company's stock has dropped by 8 per cent right after the move was announced. The falling stock has blown away $200 million of Jollibee chairman Tony Tan Caktiong's asset value.

Los Angeles-based Coffee Bean & Tea Leaf will add 14 per cent to Jollibee’s global sales and expand its store network by more than a quarter, said chairman Tony Tan Caktiong. In 2018, the coffee chain with 1,189 stores reported a net loss of $21 million on revenue of $313 million.

Coffee Bean & Tea Leaf currently owns 15 stores in Vietnam, including 13 in Ho Chi Minh City and two in Hanoi. The coffee chain is one of the top 10 coffee shops with the highest revenue in the market.

In 2018, Coffee Bean & Tea Leaf earned VND108 billion ($4.7 million) in Vietnam but reported a loss of VND29 billion ($1.26 million).

Highlands Coffee's IPO scheduled for this month has also been delayed and was put under review. Under the plan, after the IPO, Jollibee will raise its ownership to 60 per cent in Highlands Coffee, while Viet Thai International will reduce its ownership to 40 per cent. With Jollibee owning more than 51 per cent of the capital, the owner of Highlands Coffee will officially become a subsidiary of Jollibee.