August 7, 2014 12:00 am JST

Berjaya Food takes full control of Starbucks Malaysia chain

CK TAN, Nikkei staff writer

KUALA LUMPUR -- Malaysia's Berjaya Food hopes to double its earnings in two years' time by taking full control of all Starbucks coffee shops in the country.

     The restaurant franchise operator is paying $88 million to Starbucks Coffee International  for the U.S. company's 50% stake in Berjaya Starbucks Coffee Co.

Something brewing

Berjaya Food says the acquisition will give it greater control of the Starbucks franchise and allow it to explore business opportunities with the U.S. beverage company in fast-moving consumer goods.

     Starbucks' Malaysian operation saw its net profit jump 47% on the year to 35 million ringgit ($10.8 million) on sales of 301 million ringgit for the fiscal year ended April 2014. The chain runs 173 outlets in the country, contributing substantially to Berjaya Food's turnover. The company plans to add another 25 outlets in fiscal 2015.

     Following the takeover bid announcement on July 23, shares of Berjaya Food soared 69% to a record-high 3.04 ringgit on July 25.

     Given Starbucks' strong brand value, the purchase will strengthen Berjaya Food's position, AmResearch said in a note to clients. The Malaysian brokerage forecasts a 66% increase in the company's earnings by fiscal 2016.

     Starbucks shops in Malaysia are typically located at the main entrance to shopping malls. They are considered a trendier place to hang out than the country's plentiful street cafes, especially among young city dwellers, despite prices five times higher. Still, Starbucks takes care to ensure that its food is halal-certified, that is, compliant with Islamic dietary strictures.

     In addition to Starbucks, Berjaya Food operates Kenny Rogers Roasters family restaurants, Sushi Deli and beverage franchises in Brunei, Indonesia and Singapore. It acquired 50% of Starbucks' Malaysian business in 2012 from its parent, the Berjaya Group, which opened the first outlet in 1998.

Group effort

Berjaya Group is a conglomerate founded by ethnic Chinese billionaire Vincent Tan Chee Yioun, who is known to makes handsome profits from his acquisitions only to spin them off. He made his fortune in the early 1980s, when he acquired the Malaysian rights to McDonald's fast-food franchises, which he later sold. Today, his empire spans Asia, Europe and the U.S., and employs 16,000 people. Berjaya Group has far-flung interests: consumer products, property, financial services, food and beverages, vehicle assembly, lotteries and online gaming, telecommunications and media. Tan also owns an English soccer club, Cardiff City.

     Tan has several listed companies in Kuala Lumpur, Singapore, Hong Kong and the Philippines. The latest, 7-Eleven Malaysia, was floated in May.

     Two years ago, he made headlines in the U.K. when he changed the design of Cardiff City's jersey from their traditional blue to "lucky" red and the team's crest from a bluebird to a red dragon, a decision that did not go down well with many of the fans. The team fell out of the top-flight Premier League after a poor 2013-14 season.

     "Soccer is very expensive," Tan told the Nikkei Asian Review in May during a visit to Tokyo. He said he will invest more in Cardiff City using money raised from his sale of shares in 7-Eleven Malaysia.