Jollibee gains after new acquisition in China

MANILA, Philippines -- Shares in Jollibee Foods Corp., the Philippines' largest fast food chain, were firmer in early trading Monday after the company announced it has agreed to acquire another restaurant chain in China, for $50.5 million.

At 10:13 a.m., Jollibee was up 50 centavos, or 0.9 percent, at P53.50.

Volumes, however, were thin with only 192,300 shares changing hands so far. The stock reversed its direction after opening weaker at P52.

"It's definitely a good move to boost sales but some investors may be concerned about its impact on capital expenditure," said Ron Rodrigo, research head at Unicapital Securities, explaining the somewhat muted reaction from investors.

Jollibee shares were placed in a trading halt on Friday when the deal was disclosed.

Jollibee said that completion of the deal involving its purchase of China's Hongzhuangyuan restaurant chain will take at least six months.

It has agreed to pay the purchase amount in cash, in three tranches and using existing funds, over a period of 12 months from the time of completion of the purchase.

Jollibee said the Hongzhuangyuan business is quite profitable and has no debt, with sales in 2007 estimated to reach $24 million.

It is Jollibee's second acquisition in China.

In 2004, the company purchased a controlling stake in Shanghai-based Yonghe King restaurant chain for $22.5 million.

Last year, Jollibee expanded its business in China by opening the Chun Shui Tang Tea House in Shanghai, a brand name owned by Chun Sui Tang Tea House Ltd. of
Taiwan.