Domino's Pizza Group buys another 44pc of Iceland franchisor

UK master franchise holder Domino's Pizza Group announced the proposed acquisition of a further 44.3% shareholding in Domino's Iceland for EUR 30.2m (£26.7m) on Thursday, taking its ownership to 95.3%.

The FTSE 250 company said it reached agreement to acquire a further 44.3% interest in Pizza Pizza ehf, the 51%-owned subsidiary which owns the Domino's master franchise in Iceland and operates 23 stores there, taking its ownership to the 95.3% figure.

It said the consideration was approximately EUR 30.2m, payable in cash on completion.

Domino’s Pizza Group also announced the completion of refinancing, with a new revolving credit facility of £350m through a syndicate of seven banks.

It also increased its target leverage to a range of between 1.75x and 2.5x net debt-to-EBITDA, which the board said reflected the “strong” cash generation of its business model.

A further share buyback of £20m would also commence shortly, the board announced.

“We're really pleased to be increasing our ownership of Domino's Iceland earlier than was planned,” said Domino’s Pizza Group CEO David Wild.

“It's a great business and after 18 months of partnership, we have good visibility of its strengths and further opportunities for growth.

“There is a strong financial and commercial rationale for buying out minorities now rather than waiting for the put or call option to be exercised.”

Wild also explained how the board had reviewed its capital structure.

“It makes sense for a highly cash generative franchise business like DPG to have a balanced approach to equity and debt funding, and this is reflected in our revised target leverage range.

“The additional £20m share buyback takes the total share purchases announced in the current year to £55m, and underlines our commitment to returning excess capital to shareholders.”