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Tim Hortons China to go public through merger, open 2,500 new locations in five years

FILE PHOTO - Tim Hortons in China is planning to go public through a merger that would grow the number of coffee and doughnut restaurants in the country to 2,750 within five years — an aggressive rate of one new location every 36 hours.
Image Credit: THE CANADIAN PRESS/Jonathan Hayward
August 16, 2021 - 7:00 PM

Tim Hortons China is planning to go public in a deal that could rapidly speed up the chain's roll out in the growing coffee market, with plans to open more than 2,500 new locations in five years, according to an investor presentation.

Restaurant Brands International confirmed Monday that its joint venture with private equity firm Cartesian Capital Group, which includes Tencent and Sequoia Capital as major shareholders, has entered into a business combination agreement with Silver Crest Acquisition Corp. The joint venture, officially named TH International Ltd. but often branded Tim Hortons China, opened the first Tim Hortons in China in Shanghai in 2019.

Restaurant Brands said the deal with Silver Crest, a special purpose acquisition company, would see TH International traded on the Nasdaq stock exchange.

Documents filed with the U.S. Securities and Exchange Commission pegged the implied value of Tim Hortons China at US$1.69 billion, with the expected value of the new combined entity when it starts trading at above US$2 billion.

Under the deal, Tim Hortons would bring its store count in China to more than 2,750 by 2026, according to documents.

That's much more ambitious than previously announced plans. In 2018, Restaurant Brands said its partnership with Cartesian Capital would see more than 1,500 Tim Hortons restaurants in China in 10 years.

An investor presentation by Tim Hortons China included in regulatory filings said the company plans to nearly double its footprint from its current store count of 199 to 388 locations by the end of 2021.

The coffee and doughnut chain would continue to expand at a rapid rate, with 733 locations by the end of 2022, 1,163 by the end of 2023, 1,678 by the end of 2024, 2,203 by the end of 2,025 and 2,753 by year end 2026, according to the presentation.

"We will have nearly 400 units by the end of this year, opening one every 36 hours," said Tim Hortons China chief executive officer Yongchen Lu, according to a transcript of the company's investor presentation video filed with the SEC.

The restaurants would be a mix of flagship stores, classic stores and "Tims Go" locations, the documents said.

Meanwhile, the regulatory filings also offer a glimpse into how the brand — launched by a Canadian hockey player in the 1960s — performs in China.

The coffee and doughnut chain reported strong same-store sales growth of 42.5 per cent in the first quarter of 2021, the presentation said.

Still, the Tim Hortons menu has been tweaked to appeal to the preferences of the local market.

Tim Hortons China Chief Consumer Officer Bin He referred to the menu as "innovative classical products."

"Timbits were changed to mochi holes, given original doughnut holes did not sell well in China," he said in the investor presentation. "This face change makes Timbits an easier bite to reward myself in the afternoon and share with co-workers."

Restaurant Brands said the proposed merger, which still requires regulatory approval, will position Tim Hortons to benefit from China's increasing coffee consumption.

This report by The Canadian Press was first published Aug. 16, 2021.

Companies in this story: (TSX:QSR)

News from © The Canadian Press, 2021
The Canadian Press

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