The Domino’s Pizza Enterprises Ltd. (ASX: DMP) share price has risen today in response to an acquisition.
Domino’s Pizza Enterprises is the largest pizza chain in Australia in terms of both network store numbers and network sales. It is also the largest franchisee for the Domino’s Pizza brand in the world. The company holds the exclusive master franchise rights for the Domino’s brand and network in Australia, New Zealand, Belgium, France, The Netherlands, Japan, Germany and Luxembourg with more than 2,400 stores.
Domino’s Latest Expansion Plans
The ASX-listed Domino’s has entered into a binding agreement to acquire the ‘Master Franchise’ rights for Domino’s Pizza in Denmark, the corporate stores and the assets previously owned by Domino’s Pizza Scandinavia (DPS) for approximately €2.5 million.
DPS apparently ceased operations and entered administration in March 2019. That doesn’t exactly sound like the best starting point for the ASX-listed Domino’s to be starting with, although it does seem to be at a very cheap acquisition price.
The completion of each store asset package is conditional on getting the relevant store lease agreement. Completion is expected to occur during April and May.
With a population of 5.7 million people, Denmark is a useful bolt-on acquisition to the rest of the European operations. Domino’s management believes that there is the opportunity to have around 150 franchised and corporate stores in the country.
The ASX-listed Domino’s has received the blessing of the US-listed Domino’s and has a Master Franchise Agreement for up to 25 years, with an initial term of 15 years.
Domino’s Pizza Enterprises plans to start with around 20 stores within the next year and will use its experience to re-calibrate the existing stores and will be led by executives from its European operations.
Due to the small numbers being mentioned, the set-up costs will not impact the underlying profit per share (EPS) in FY19.
In what could be a positive suggestion, the company continues to “evaluate other acquisition opportunities globally.”
This deal expands Dominos’ potential growth over the long term and I can see why the share price increased today. However, it is ultimately just a high-tech pizza business so I’m not sure today’s price is worth buying at. Under $40 would be a better price to buy at.
I would rather consider the exciting ASX growth shares in the free report below over Domino’s.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
At the time of publishing, Jaz does not have a financial interest in any of the companies mentioned.