Domino's Pizza is doubling down on its push into Germany, buying the Hallo Pizza chain in a deal worth about $100 million.
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
Domino's, through its majority-owned German joint venture, will buy the 170 store chain for ???32 million ($48 million) with another ???20 to ???30 million to be spent on re-branding, store conversions and transaction costs.
The deal, which is expected to close early in 2018, will give a "low single digit" boost to the company's earnings excluding those integration costs.
The acquisition is expected to close in early calendar 2018, subject to the satisfaction of certain conditions.
In a statement to the ASX on Thursday morning, Domino's described Hallo Pizza as "the largest independent pizza chain in Germany".
Hallo Pizza turned a ???3.5 million profit before interest, tax, depreciation and amortisation off sales of ???80.2 million.
The deal includes Hallo Pizza's procurement and logistics business, Chrisa, which operates three commissaries.
The acquisition would increase the Domino's store count in Germany from 209 to about 300 - 340 following brand conversions, a process that would take up to three years, the company said.
"Existing Hallo Pizza stores will be operated on a transitional basis until franchise contracts are converted to Domino's," it said.
The transaction would improve profitability of both former Hallo Pizza stores and existing Domino's stores as national advertising campaigns, social media initiatives and IT innovations were leveraged over a larger network, the company said.
"The acquisition of Hallo Pizza strengthens our leading market position and assists [Domino's Pizza] to accelerate towards achieving its target of operating 1000 stores in Germany," Domino's managing director Don Meij states.
"We are excited to share our innovations with Hallo Pizza franchisees to drive the customer experience and higher sales under the Domino's system."
Domino's has been under pressure in the past 12 months as its share price has fallen from $72.79 to $47.70 in the face of claims its franchisees struggle to make profits and concerns about changes to workplace conditions.
The owner of Hallo Pizza, Axel Fassbach, said he was "delighted" with the deal.
"We will work with Domino's management to ensure a seamless transition for our franchisees," he said.
