Figaro Coffee Group Inc files with SEC for P1.8 billion IPO
The Figaro Coffee Group is owned by Camerton Holdings, which is the same holdco (controlled by Jerry Liu) that owns Cirtek [TECH 4.46 2.19%], and is itself something of a holdco for Figaro Coffee, Angel’s Pizza, and a handful of other dining concepts. Figaro did not specify a ticker symbol in its preliminary prospectus (available here), but I’m going to go ahead with “KAPE” until I’m told otherwise because I think that’s pretty much the best that can be done, and it would be incredibly disappointing for it to be anything else.
The deal: KAPE is selling 1.26 billion common shares in the offer, plus up to 126 million common shares as part of an overallotment option, for a grand total of 1.365 billion common shares at up to P1.28/share. The shares represent 27.7% of the company, post-IPO. All of the shares are primary, even the overallotment option shares.
What does “primary” mean? It means that the shares are “new”, and that any money paid for them will go directly to KAPE, for KAPE to use on whatever it plans to do. Sometimes you’ll see a certain percentage of shares referred to as “secondary shares”, and this just means that the shares being sold are already issued and owned by someone else, such that money paid for those shares would go to that someone else and not to the company. Not here, though. KAPE gets it all.
Use of proceeds? KAPE plans to use 100% of the post-transaction proceeds (after all the IPO expenses are deducted) for store openings and renovations (39%), potential acquisitions (35%), commissary expansion (25%), and debt repayment (5%). Of those things listed, KAPE expects the expenditures related to store openings and renovations to be completed between 2022 and 2024, and those for the commissary expansion to be done through 2023. Potential acquisitions are listed as “within the next three years”. Debt repayment would happen in 2022.
How big is this company? The P1.28/share price implies a post-IPO market capitalization of approximately P6.4 billion, which puts it somewhere around Greenergy Holdings [GREEN 2.45 3.38%] (P6.4 billion), above Century Properties [CPG 0.46 3.37%] (P5.3 billion), but below EEI Corp [EEI 6.65 4.73%] (P6.7 billion). A more direct competitor like Shakey’s Pizza [PIZZA 8.08 0.74%] has a marketcap of about P13.4 billion.
What is KAPE’s competition? The company lists Bo’s Coffee first in the Competitors section of its prospectus, followed by Starbucks, and Coffee Bean & Tea Leaf (owned by Jollibee [JFC 238.00 2.59%]). For its Angel’s Pizza locations, KAPE lists Pizza Hut and PIZZA as its competitors.
How many locations does it have? As of September 2021, KAPE has: 52 Figaro coffee shops, 31 Angel’s Pizza outlets, five Tien Ma’s Taiwanese cuisine restaurants, one TFG Express outlet, and one Café Portofino outlet. KAPE plans to expand this to 150 systemwide stores (domestic and international) by the end of 2022, and to 300 systemwide stores by the end of 2029. Out of the 61 new stores that it plans to build with IPO proceeds, 35 of them are for Angel’s Pizza. KAPE only plans to use the proceeds to build 6 new Figaro Coffee shops in the next 3 years.
Key dates: It’s still early yet, but KAPE says that it is aiming to price the offer on December 10, with an offer period between December 16 and 22, with a listing date of December 31.
MB BOTTOM-LINE
“More, more, MORE!”, shouted Mr. Monzon, and so the IPOs appeared. I have to admit that this one surprised me.
I knew that Bo’s Coffee had received a significant private investment some years ago, but even knowing that, I wasn’t looking at Figaro with anticipation. I’m also interested to hear more about what company or companies KAPE plans to acquire with the P500 million it is budgeting for acquisitions.
Will it try to take a swing at Bo’s Coffee, its main competitor at the domestic chain price-point? Or does the focus on Angel’s Pizza for its expansion plans reveal a bias towards buying something in the pizza/delivery category?
I haven’t done a deep enough dive with the prospectus to get a good feel for this one yet. While I’m always excited for deals that are primary-heavy like this, but if I’m being honest, I’m also a little uncertain after learning of the management DNA that KAPE shares with TECH.
I think the quick-service restaurant industry (and coffee is a part of that) will be a huge part of a post-COVID recovery, but I think I need to spend some more time with this one to see whether it will be a part of my plans.
--
Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
- Latest
