Fast-food chain to list on ASX

Mexican-inspired fast-food restaurant chain Guzman y Gomez (GYG) is set to list on the ASX on 20 June, enabling major shareholders, including TDM Growth Partners and Barrenjoey Private Capital, to begin selling down their stakes.

GYG confirmed on 31 May that it would launch a fully underwritten IPO of 11.1 million shares at $22 a share to raise around $242.5 million.

The float does not include a general public offer of shares.

GYG will raise $42.5 million from the sell-down of shares by some existing investors and around $200 million from the issue of new shares. The float will value the business at $2.2 billion.

TDM, which currently holds a 33% stake, will reduce that to 29.7% in the IPO. Co-founder and co-chief executive Steven Marks will hold a 9.9% stake including two million options (down from 11.2%). Barrenjoey will hold 9.6% (down from 10.5%) and chairman Guy Russo will control 5.6% (down from 6.5%).

Existing substantial shareholders, the company’s board and senior management will still hold around 62% of the company after the float.

Barrenjoey Markets and Morgan Stanley Australia are underwriting the float as joint lead managers.

GYG said it had received “considerable support and demand” for the shares from current investors including Aware Super, Cooper Investors, Hyperion Asset Management, Firetrail Investments and QVG Capital. These investors backed a $135 million capital raising round in April which followed the company postponing a previously planned IPO.

TDM, Barrenjoey and other shareholders who are selling down their stakes in the float have entered into a voluntary escrow agreement covering their remaining shares until release of the company’s 2025 financial year results. After that, they will be able to sell up to 25% of their stakes once the share price trades 20% or more above the offer price for 10 consecutive trading days.

GYG said it would use the float proceeds to fund growth, mainly in Australia. The company plans to open 30 new restaurants in 2025, 20 of them set up for drive-through sales.

The company’s net loss increased to $3.9 million in the first half of the current financial year from $1.1 million in the prior corresponding period increased by one-off costs including a $2 million payment to former US executives who claimed GYG had failed to deliver on an expansion plan which would have increased the number of US stores from the current four to 187.

Co-chief executive Hilton Brett said: “GYG has a strong operational and financial track record, with global network sales increasing from $101 million in financial year 2015 to $759 million in financial year 2023, a compounding annual growth rate of 29%.

“We expect our sales growth to continue through the opening of new restaurants. We also expect our profitability to improve as we continue to improve our execution in restaurants as we further leverage the benefits of our increasing scale. As a result, we expect pro forma EBITDA to grow from $29.3 million in financial year 2023 to $59.9 million in financial year 2025.”

GYG has 185 restaurants in Australia (123 franchised and 62 company operated), 16 in Singapore and five in Japan (owned and operated by separate master franchisees) and four company run restaurants in the US.

The company expects its global network annual sales to reach almost $1.14 billion by financial year 2025.

While it currently plans to focus on Australia, GYG maintains it has a strong opportunity for overseas expansion, including in the US where its current four restaurants are all in the suburbs of Chicago. GYG plans to open a further three restaurants in the same area in financial year 2025.

Image: TDM joint chief executives Hilton Brett and Steven Marks.