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Domino's Pizza Group plc

Domino’s Pizza Group plc JV to Acquire Hallo Pizza GmbH for €32 million

Domino’s Pizza Group plc (LON:DOM), the leading pizza company in the UK, today announced that Daytona JV Limited (the “German Joint Venture”), which operates the Domino’s master franchise in Germany, and in which DPG owns a one third stake, is to acquire Hallo Pizza GmbH (“Hallo Pizza”), for a consideration of €32 million on a cash and debt free basis1.

About Hallo Pizza

Hallo Pizza is the largest independent pizza chain in Germany with a comprehensive national footprint of 170 franchise stores throughout Germany. Hallo Pizza generated network sales of €80.2 million and normalised EBITDA of €3.5 million for FY162.

Transaction rationale

The acquisition will strengthen the German Joint Venture’s market leading position and increase the store count in Germany from 209 to approximately 300-3403 following brand conversions, accelerating progress towards its 1,000 store target. Existing Hallo Pizza stores will be operated on a transitional basis until franchisee contracts are converted to Domino’s.

The transaction is also expected to improve the profitability of former Hallo Pizza stores and existing Domino’s stores for both franchisor and franchisees as stores are converted to Domino’s and national advertising campaigns, social media initiatives and IT innovations are leveraged over the larger store network.

The transaction is scheduled to complete in the first quarter of 2018. Following completion, the German Joint Venture will work with the vendor and Hallo Pizza management to convert franchise contracts to the Domino’s brand over the next 2-3 years.

Acquisition consideration and funding

The purchase price for Hallo Pizza of €32 million will be payable on completion of the transaction. An additional €20-30 million of costs are estimated to be incurred over the next 2-3 years to finance store conversions and other transaction costs. The consideration and related costs are to be funded by the German Joint Venture’s shareholders, Domino’s Pizza Enterprises Limited (“DPE”) and DPG, in proportion to their current shareholdings. Accordingly, DPG will fund one third of the purchase price on closing of the transaction (€11 million) and one third of the conversion and other transaction costs over the next 2-3 years.

Extension to joint venture agreement

In respect of the German Joint Venture, DPG and DPE have agreed to extend the put and call option agreements over Domino’s Pizza Group plc interest in the German Joint Venture by one year. DPG’s put option will now be exercisable at any time on or after 1 January 2021, and DPE’s call option will be exercisable at any time on or after 1 January 2023.

1. The acquisition is to be effected by Daytona Germany GmbH, a wholly-owned subsidiary of the German Joint Venture, and Domino’s Pizza Deutschland GmbH, another wholly-owned subsidiary of the German Joint Venture.

2. Hallo Pizza financials for the year ended 31 December 2016. Normalisation adjustments comprise the removal of expenses relating to the vendor, other general and administrative costs which are non-recurring in nature, and other items which differ under the future ownership structure.

3. The German Joint Venture expects approximately 45 stores from either the existing store network or Hallo Pizza to be consolidated over time due to the proximity between stores in some locations with existing German Joint Venture stores.

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