SYDNEY, AUSTRALIA: Domino’s Pizza Enterprises Ltd (DPE) has entered into binding agreements with Mikenwill (M) Sdn Bhd, Impress Foods Pte Ltd and minority shareholders to acquire 100% interests in the Domino’s Pizza businesses in Malaysia, Singapore and Cambodia.

The three territories comprise 287 corporate-owned stores, with 240 stores in Malaysia, 38 stores in Singapore and 9 stores in Cambodia.

The initial purchase price for the acquisition is 660 million Malaysian ringgit (equivalent to c. A$214 million), which Domino’s will fund through cash and debt facilities. The business delivered 65 million Malaysian ringgit (A$21m) normalised EBITDA pre-IFRS16 in the year to 30 June 2022.

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 11x adjusted EBITDA pre-IFRS16 multiple which is measured as an average over a trailing two-year period.

The maximum earn out is 440 million Malaysian ringgit (equivalent to A$142m). The earn out recognises current business volatility and has allowed DPE to acquire the territories earlier than otherwise would have been the case.

The acquisition will further cement the position of Domino’s Pizza Enterprises Ltd in Asia, where the Company has been expanding its store footprint through franchised and corporate stores in Japan and Taiwan. The transaction is the largest single acquisition of stores in the company’s history.

Group CEO & 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.

Mr Meij said 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 2nd largest pizza chain by store count behind Pizza Hut in the three regions.

“Domino’s Pizza Enterprises Ltd 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.

CEO Asia/Pacific Josh Kilimnik said management intended to apply proven strategies in these newest markets.

“We are excited for the opportunity to work with the team in Malaysia, Singapore and Cambodia, unlocking new opportunities for team members to become franchisees, building on our shared expertise to lift this business to the next level,” Mr Kilimnik said.

“We thank the founders of the business, Dato’ Ting (George) Yew Tong and his business partners, for their successes in creating a path for Domino’s across multiple markets, introducing Domino’s (and indeed pizza) to new customers, and winning their loyalty.

“Domino’s Pizza Enterprises 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.”

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.

DPE was advised by Aperture Capital Partners and Thomson Geer, with assistance from EY, Mah-Kamariyah & Philip Koh, GT Law and DFDL.