Mubadala’s Zamp eyes Subway; Vinci, owner of Domino’s, could make a move.
In a competitive and fragmented market, large fast-food chains are again studying acquisition and divestment opportunities in Brazil, indicating a new sector consolidation spree.
With the Mubadala fund at the helm of the business, Zamp, which operates Burger King and Popeye’s in Brazil, bought Starbucks’s operations and confirmed that it is “studying the opportunity to develop the Subway brand in Brazil.” Like Starbucks, the fast-food chain was also controlled by SouthRock, which declared bankruptcy last year.
Vinci, Domino’s largest shareholder in Brazil, is also eying assets in this segment again, Valor learned.
Bloomin’ Brands, a group that owns Outback and Abraccio, has also announced that it is evaluating alternatives in Brazil, including divestiture. About two years ago, the group started to seek a new partner, and then a buyer for the entire business. However, as there haven’t been any firm proposals given uncertainties in the food chain sector, the group postponed its plans.
“After the upheaval related to the pandemic, companies sought to streamline their cost structure and accelerate growth, whether opening new stores or seeking M&As,”
said Luiz Guanais, an analyst at BTG Pactual. For Mr. Guanais, the trend makes sense given the situation of the fast-food segment in Brazil, which has low penetration compared to other markets and is fragmented between regional players.
In this context, companies are open to seeking strategic opportunities for their operations, as Zamp did with Starbucks, the analyst points out.
After seven months of negotiations with the parent company in the U.S., Zamp Brazil reached an agreement to acquire the coffee chain’s assets in the country for R$120 million. Starbucks was controlled by SouthRock until then. The operation is pending authorization from SouthRock’s bankruptcy trustee, the signing of a final agreement with Starbucks, and approval by the Administrative Council for Economic Defense (CADE).
In a recently released report, Bradesco BBI projected that Zamp would have 1,569 stores in the country with the merger, including 135 Starbucks units. It would also boast a net revenue of R$4.3 billion, earnings before interest, taxes, depreciation, and amortization (EBITDA) of R$622 million, and leverage of 2.6 times the net debt-EBITDA ratio.
While the company is facing challenging times in Brazil, there is a consensus in the market that Starbucks is a profitable business and that the brand’s situation in the country is the result of poor choices made by the former management.
Sources familiar with the matter expect the BK’s parent company to go further in its consolidation movement. Some analysts compare the Brazilian chain with Alsea, a Mexican company that operates Burger King, Starbucks, Domino’s, and 10 other brands in Latin American and European countries, acting as a “house of brands” in the fast-food segment.
IMC, the owner of eight operations in Brazil, including KFC, Pizza Hut, and Frango Assado, tried a similar move a few years ago. The chain currently has 569 stores in Brazil and the U.S. Despite the effort, the result has not appeared in the company’s financial statements. In the first quarter, the company posted a R$76.2 million loss, following net earnings of R$122.6 million.
Source: Valor International
