London-listed Domino’s Pizza Group PLC (LON:DOM) has strengthened its market-leading position in Germany after it snapped up Hallo Pizza, one of its biggest rivals in the country, for €32mln.
Hallo is the largest independent pizza chain Germany which generated underlying earnings (EBITDA) of €3.5mln on sales of €80.2mln last year.
READ: Domino’s surges as it hints at full-year profits beat after strong third quarter
It has 170 franchise stores in total which will boost Domino’s total store count in the country to between 300 and 340 when the deal officially completes – likely in the first quarter of 2018.
That figure is expected to grow significantly in the longer-term, with management looking to eventually open 1,000 stores.
Deal to improve profitability
On top of the upfront fee, Domino’s Daytona joint venture – which operates the Domino’s master franchise in the country – will also set aside an additional €20-30mln of costs over the next two years to finance store conversions and other transaction costs.
Domino’s said the deal will improve the profitability of the Hallo stores and existing Domino’s stores in Germany as national advertising campaigns, social media initiatives and IT innovations are leveraged over a larger store network.
Domino’s shares were up 0.5% to 326.7p in mid-morning trade on Thursday.