HOW HAS JOLLIBEE'S $25 MILLION INVESTMENT IN HIGHLANDS COFFEE APPRECIATED AFTER NEARLY 15 YEARS?

A new transaction involving Highlands Coffee is attracting attention, demonstrating a significant increase in the value of the Vietnamese coffee brand after nearly 15 years of Jollibee Foods Corporation (JFC)'s involvement.

According to the latest disclosed information, Jollibee will transfer an 11% stake in Highlands Coffee to Viet Thai International (VTI) for approximately $88 million. This transaction implies an equity valuation for Highlands Coffee of approximately $800 million. Following the completion of the transaction, VTI will increase its ownership to 51%, while Jollibee will retain 49%.

From a $25 Million Investment in 2012

In 2012, Jollibee completed an investment of approximately $25 million to acquire 50% of SuperFoods Group's operations. The investment structure at that time included 49% in the Vietnamese entity and 60% in the Hong Kong entity.

At that time, SuperFoods Group not only included Highlands Coffee but also PHO24 and Hard Rock Cafe franchise operations in certain markets.

By 2017, Jollibee further invested and increased its stake in SuperFoods Group from 50% to 60%.

11% Stake Now Valued at $88 Million

According to the recently announced transaction, the 11% stake in Highlands Coffee that Jollibee is transferring alone is valued at approximately $88 million.

If this figure is compared solely to the initial $25 million investment in 2012, the proceeds from the 11% stake are already equivalent to approximately 3.5 times the initial capital investment.

After the transaction, Jollibee will still own 49% of Highlands Coffee. Applying the same $800 million valuation, this stake has a theoretical value of approximately:

49% × $800 million = $392 million.

Thus, the 60% of Highlands Coffee that Jollibee held immediately prior to the transaction was valued at approximately $480 million, comprising:

• $88 million from the 11% stake being transferred; and
• approximately $392 million in value from the remaining 49% stake.

Purely in terms of valuation, $480 million is equivalent to approximately 19.2 times the $25 million investment made in 2012.

However, it cannot be concluded that Jollibee "profited 19 times"

The above figure primarily reflects the increase in the value of the investment, not Jollibee's actual profit.

Several factors need to be considered.

Firstly, the $25 million in 2012 was not solely invested in Highlands Coffee but was an investment in SuperFoods Group, which at the time also included other business operations.

Secondly, Jollibee continued to inject capital in subsequent years and increased its ownership to 60% by 2017. Therefore, the total actual capital invested by the group did not stop at $25 million.

Thirdly, to accurately calculate the return on investment, it is necessary to consider the entire cash flow, including additional capital, dividends or profit distributions received, proceeds from other assets, and the timing of each cash flow.

Therefore, dividing $480 million directly by $25 million should only be understood as a comparison of the magnitude of value growth, not an accurate return on investment.

Highlands Coffee from 56 Stores to an $800 Million Valuation

When Jollibee first invested, Highlands Coffee had only a few dozen stores. After more than a decade of expansion, the system now exceeds 1,000 stores in Vietnam and international markets.

Beyond expanding its scale, Highlands Coffee has also become an increasingly important asset in Jollibee's ecosystem. According to recent information, Highlands has contributed more than 8% of the group's profit and is being considered for a future listing plan.

The current transfer of an 11% stake therefore not only helps establish a new valuation of approximately $800 million for Highlands Coffee but also demonstrates the significant value created through the brand's expansion over nearly 15 years.

From an investment perspective, this is a notable example of how a strategic investment in a consumer business in Vietnam can significantly increase in value over time.

OPLAW | Legal & Business Insights

This article provides general information and analysis and is not intended as investment advice or a recommendation to execute transactions.

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