Shares in Domino’s Pizza Enterprises Ltd (ASX: DMP) soared over 17% in heavy trading following reports of a potential takeover bid. On Tuesday morning, the Australian Financial Review revealed that Bain Capital Specialty Finance Inc (NYSE: BCSF) is contemplating a bid for the company, potentially valuing it at up to $4 billion.
At the close of trading on Monday, Domino’s was valued at $1.46 billion, suggesting a takeover premium exceeding 100% if the speculation proves accurate.
Struggles and Strategic Shifts
Domino’s shares have been under pressure recently, hovering near their 12-month low of $13.11 after a disappointing profit report in August. The company announced full-year sales revenue of $4.15 billion, a decline of 0.9%, and earnings of $198.1 million, down 4.6%.
In July, Domino’s disclosed that its managing director, Mark van Dyck, would step down in December, with major shareholder Jack Cowin assuming the executive chair role. Cowin, the founder of Hungry Jack’s and a pioneer in Australia’s fast-food industry, brings over five decades of experience to the table.
Back to Basics
At the August results announcement, Cowin emphasized a return to fundamentals. “We’re taking action to make Domino’s a leaner, more efficient business. That means reducing costs – and using those savings to support our franchise partners and invest in marketing that drives sales,” he stated.
“We will share the rewards when we get it right – with customers, with partners, and with shareholders,” Cowin added. “Customer expectations haven’t changed – they want great food, delivered fast, at a fair price. That’s where we’re focused. Product. Service. Image. Value.”
Market Reactions and Historical Context
Domino’s shares were paused from trading on Tuesday morning after the AFR article was published. The shares last traded at $18.13, marking a 17.4% increase, though still below their 12-month high of $36.68.
The Australian also reported on the potential deal, noting that Bain Capital is a minority shareholder in the US-based Domino’s Inc. Bain Capital has a track record in Australia, having acquired Virgin Australia Holdings Ltd (ASX: VGN) in 2020 after creditors agreed to a $3.5 billion deal. Virgin was relisted on the ASX on June 24 and is currently valued at $2.67 billion.
Looking Ahead
Domino’s is set to hold its annual general meeting on November 12, where Cowin will stand for re-election. This meeting could provide further insights into the company’s future direction amid the takeover speculation.
As the situation develops, industry analysts are watching closely to see how Domino’s strategic initiatives and potential ownership changes might impact its market position. With Bain Capital’s interest, the fast-food chain could be poised for a significant transformation, potentially reshaping its operations and market strategy.
