BreadTalk to acquire Food Junction for $80m
The acquisition will make it the third largest foodcourt operator here
BreadTalk founder George Quek is coming full circle with the food and beverage company's latest move - a proposed complete acquisition of Food Junction, a foodcourt operator he helped start in 1993.
Analysts said BreadTalk Group's plan to buy Food Junction Management for $80 million marks a further consolidation in the foodcourt and coffee shop market as larger firms continue to take out smaller ones in seeking market share and expansion.
The proposed acquisition will be paid in cash funded through BreadTalk's internal resources, including available cash on hand, and debt facilities, the company said in an announcement on the Singapore Exchange yesterday.
BreadTalk's wholly owned subsidiary, Topwin Investment Holding, entered into a sale and purchase agreement for the move on Aug 30.
The acquisition is set to make BreadTalk the third largest foodcourt operator here, behind NTUC Enterprise - which announced it would buy food centre operator Kopitiam last year - and Koufu.
DBS analyst Alfie Yeo said: "With NTUC Enterprise buying Kopitiam in 2018, Broadway buying S-11 last year as well, and now BreadTalk buying Food Junction, the market for foodcourts and coffee shops is indeed consolidating."
As at June 30, BreadTalk operates 14 foodcourts in Singapore and two in Malaysia under the Food Republic and Food Opera brands.
But Mr Yeo said while the transaction value is $80 million, this is for a business whose net profit in the first half of this year was just $3,183.
In the 2018 financial year, it recorded a net loss at $1.7 million. With Food Junction's net tangible assets valued at $12.3 million, this implies a price-to-book ratio of over six times.
The ratio compares a company's market value to its net assets and in comparison, Koufu has a price-to-book ratio of less than four times.
Mr Yeo said there could be some drag on earnings per share in the short-term, with interest cost from the loan for the acquisition weighing on BreadTalk. But he said Food Junction seems to be turning around with headline earnings in the first six months of this year improving.
BreadTalk yesterday said the planned acquisition will allow it to obtain additional revenue streams and "benefit from the synergies" with its existing businesses.
BreadTalk shares closed 2.21 per cent down yesterday.