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- Restaurant chain Guzman y Gomez has raised $162 million in an initial public offering in Australia.
- Thursday’s IPO was Australia’s largest in nearly a year, with shares up 36% from the offering price.
- The funding will fuel GYG’s plans to expand to 1,000 stores across Australia over the next 20 years.
Mexican fast-casual chain Guzman y Gomez, the Asian version of Chipotle, has gone public in Australia.
Shares in the fast-food restaurant began trading on the Australian Securities Exchange on Thursday. The initial public offering values GYG at 2.2 billion Australian dollars ($1.47 billion).
The IPO would be Australia’s largest in a year. The Sydney-based chain was seeking to raise about $162 million, about one-sixth of its enterprise value, through a limited-sales offering.
Within hours of trading, the company’s shares had risen 36% from their IPO price of about $15.
GYG’s prospectus said the company plans to use the funds to expand to more than 1,000 restaurants in Australia over the next 20 years. McDonald’s and Subway have about 970 and 1,220 restaurants respectively in Australia.
GYG was founded in Sydney in 2005 by former hedge fund trader Steven Marks. It now has 185 stores in Australia, 17 in Singapore, five in Japan and four in the U.S. The company said it had sales of $506 million last year.
“Our mission to reinvent fast food and change the way the masses eat has only just begun,” Marks said in a statement to Business Insider.
By comparison, Chipotle has 3,400 locations across North America and Europe. The U.S.-based Mexican fast-food chain is valued at $94 billion and had revenues of nearly $10 billion last year. Unlike GYG, which follows a franchise model, Chipotle owns and operates all of its locations. Franchisors make a profit from annual license fees and receive a percentage of the restaurant’s revenue.
Analysts have mixed opinions
Despite the chain’s growth over the past two decades, some analysts are pessimistic.
Morningstar analysts valued the company’s shares at A$15 a share in a pre-IPO report on Wednesday. They said the A$22 offer was too high considering GYG is at a much earlier stage than larger rivals like McDonald’s and Domino’s. They also said they were unsure whether GYG could follow through on its plan to open 1,000 stores.
GYG is backed by TDM Growth Partners, Barrenjoey Private Capital, Aware Super, Cooper Investors, Hyperion Asset Management, Firetrail Investments and QVG Capital.
“The company and its highly conflicted investors and advisors have determined that a valuation of A$2.2 billion is a reasonable estimate for the business,” Michael Hutchens, founder of financial modelling firm Modano, said in a LinkedIn post.
“This is regardless of the fact that the company is struggling to turn a profit and would actually have gone bankrupt over the past year if it hadn’t quietly raised A$135 million pre-IPO,” Hutchins wrote.
GYG joins 11 companies that have listed on the ASX so far this year, where IPOs have slowed significantly in recent years as pandemic stimulus measures ended and central banks raised interest rates to tame inflation. There will be 45 listings in 2023, compared with 107 in 2022 and a record 241 in 2021.
GYG shares are not being offered to the public. In a pre-IPO announcement, the company said it would only be available for purchase by institutional investors who have been allocated GYG shares, eligible employees and franchise owners, and retail clients of brokerage firms.
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