Who is investing in the Guzman y Gomez IPO?

Some substantial investors are planning to buy GYG shares.

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The Mexican food business Guzman y Gomez (GYG) plans to list on the ASX next week with an initial public offering (IPO). Multiple institutions are already planning to buy the company's shares.

Burritos, tacos and enchiladas may not seem like the most exciting product category, but Guzman y Gomez has spicy growth plans, and investors are lining up to take part in its growth journey.

We've seen a number of local and global players become much bigger companies after listing, including Yum! Brands, McDonald's, Chipotle, Domino's Pizza Enterprises Ltd (ASX: DMP) and Collins Foods Ltd (ASX: CKF). Guzman y Gomez itself has international growth plans, with a small presence in Asia and the United States.

Of course, the success of those other businesses doesn't automatically mean Guzman y Gomez is going to do as well. But, food for thought.

Significant backers

The main proceeds of the offer will be used to fund GYG's growth strategy over the coming years, which is primarily focused on the significant expansion of its corporate restaurant network in Australia.

Guzman y Gomez revealed it has received considerable support and demand from existing shareholders, including Aware Super, Cooper Investors, Hyperion Asset Management, Firetrail Investments and QVG Capital.

GYG's other existing large institutional shareholders — TDM Growth Partners and Barrenjoey Private Capital — will retain significant holdings in the company after the IPO.  

Last week, Guzman y Gomez announced it had received a commitment from funds advised by Capital Research Global investors to subscribe for shares at the offer price. TDM Growth Partners is selling more shares to accommodate the investment relating to Capital Research Global, but TDM will still own 26.2% of GYG.

Will the leadership still own shares?

According to Guzman y Gomez, the board, senior management, and existing substantial shareholders (including TDM) will still own approximately 59% of GYG shares after the IPO.

A number of management and board figures plan to own shares at the GYG IPO's completion. I will highlight a select few below.

  • Guy Russo, the non-executive chair, who was previously the CEO of McDonald's Australia and managing director of Kmart Australia and New Zealand, is expected to own 6.08 million GYG shares at IPO completion.
  • Steven Marks, founder, executive director and co-CEO of Guzman y Gomez, will own 8.8 million shares at IPO completion.
  • Hilton Brett, co-CEO and executive director, will own 367,000 shares.
  • Bruce Buchanan, an independent non-executive director since August 2016, will own 418,250 shares.

Once the business is listed, Guy Russo and Steven Marks will own well over $100 million of GYG shares.

Foolish takeaway

Guzman y Gomez expects to open 30 new restaurants in FY25. Management believes the company has substantially built the team, restaurant pipeline and infrastructure to increase this to 40 restaurants per annum within five years, with a focus on drive-through restaurants due to their potential to deliver superior restaurant economics.

Time will tell whether the business is able to deliver on its ambitious targets.

Motley Fool contributor Tristan Harrison has positions in Collins Foods. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Chipotle Mexican Grill and Domino's Pizza Enterprises. The Motley Fool Australia has recommended Chipotle Mexican Grill, Collins Foods, and Domino's Pizza Enterprises. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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