Shares in Domino's Pizza Enterprises Ltd (ASX: DMP) have jumped more than 17% in heavy trade after speculation emerged of a potential takeover bid.
On Tuesday morning, the Australian Financial Review reported that private equity firm Bain Capital Specialty Finance Inc (NYSE: BCSF) was considering a bid for the company worth as much as $4 billion.
At the close of trade on Monday, Domino's was valued at just $1.46 billion, implying a takeover premium of well over 100% should the AFR speculation be correct.
Struggling to compete
Domino's shares have been out of favour recently, trading near their 12-month lows of $13.11 following a lacklustre profit result in August.
At that time, the company reported full-year sales revenue of $4.15 billion, down 0.9%, and earnings of $198.1 million, down 4.6%.
Domino's in July announced that its managing director, Mark van Dyck, would step down in December, while major shareholder and the founder and owner of Hungry Jack's, Jack Cowin, would move into the executive chair role.
Mr Cowin also founded KFC in Australia and has over five decades of experience in the fast-food business in Australia.
Back to the basics
Mr Cowin said at the time of the results announcement in August that the company was concentrating on getting the fundamentals right.
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. We will share the rewards when we get it right – with customers, with partners, and with shareholders.
Mr Cowin said customer expectations had not changed – they wanted "great food, delivered fast, at a fair price''.
That's where we're focused. Product. Service. Image. Value.
Domino's shares were paused from trade on Tuesday morning after the article was published on the AFR website.
The shares last changed hands for $18.13, up 17.4%. This is well below the 12-month high for the shares of $36.68.
The Australian was also reporting on the deal on Tuesday, saying Bain Capital was a minority shareholder in the publicly-listed US Group Domino's Inc.
Bain Capital has runs on the board in Australia, buying airline Virgin Australia Holdings Ltd (ASX: VGN) in 2020 after its creditors agreed to a $3.5 billion deal.
Virgin was subsequently relisted on the ASX on June 24, and is currently valued at $2.67 billion.
Domino's is scheduled to hold its annual general meeting on 12 November, when Mr Cowin will stand for re-election.
