Magellan’s Hamish Douglass channels Warren Buffett with $87m Guzman Y Gomez fast food play
A string of high profile AFL, NBA and cricket stars have joined an ASX guru to become backers of fast-growing Mexican food chain Guzman y Gomez.
A string of high profile AFL and cricket stars as well as finance boss Magellan chairman Hamish Douglass have become backers in fast-growing burritos and tacos chain Guzman y Gomez.
Mr Douglass said Magellan was utilising its long-held expertise in the quick services restaurants space with the $86.8 million investment for a 10 per cent stake in Guzman y Gomez. The investment puts an enterprise value on Guzman y Gomez of over $800 million.
At the same time the Athletic Ventures investment fund founded by Greater Western Sydney Giants player Matt de Boer has also emerged with an undisclosed stake in the restaurant chain. Backers of the Athletic Ventures fund include NBA player Matthew Dellavedova, Wallabies captain Michael Hooper, and GWS Giants player Toby Greene.
Mr de Boer said the chain was a natural fit for the Athletic Ventures fund.
“Athletes care deeply what they put in their bodies. All of us were already huge Guzman y Gomez fans, with many elite teams serving Guzman y Gomez as their recovery meals on game days”.
“We are so pleased to be investing in such an aligned business that we can genuinely support and add value to,” he said.
The investment by Mr Douglass is a nod to world’s most revered investor Warren Buffett who famously said he was a better investor by being a business owner.
As well as investing in top stocks, over the decades his Berkshire Hathaway group has taken a range of minority positions in companies across the insurance, railroads, manufacturing, utilities and logistics sectors.
Magellan has made more than seven times its money on its investment in Yum Brands. which owns KFC, Pizza Hut and Taco Bell. Its position in global fast food giant McDonalds has also returned multiples on Magellan’s initial investment.
“We have had enormous investments in the quick service restaurants space so we know it very well. This business has great potential. Chipotle is worth $US37bn. This business has 147 stores at the moment, including in Singapore and Japan and pilots in the US. It will grow to have 500-600 stores in Australia,’’ Mr Douglass told The Australian.
Sydney fund manager TDM Growth Partners is Guzman y Gomez’s biggest shareholder with a 35 per cent stake, while co-founders Steven Marks and Robert Hazan own 16 per cent and 8 per cent respectively.
Guzman y Gomez is chaired by ex-Kmart and McDonald‘s Australia executive Guy Russo. Another director is former Jetstar chief executive Bruce Buchanan, who is now based in New York running the Lachlan Murdoch-backed digital marketing firm Rokt.
Mr Douglass said Magellan approached TDM two months ago about taking a position in Guzman y Gomez. Magellan’s move will mean Guzman y Gomez shelves its plans to list on the Australian Securities Exchange next year, which would have reportedly valued the company at over $500m.
The Guzman y Gomez investment is the latest for Magellan’s Principal Investments arm, which has also taken a 40 per cent economic stake in the fledgling investment and advisory firm Barrenjoey - to be chaired by former ANZ chairman David Gonski - and made a $20 million-odd investment in financial services group FinClear.
“This is our first step outside financial services. None of these investments have we been in competition with anyone else. They have been purely the product of bilateral discussions. Two businesses have now stopped their IPO plans (FinClear was also planning an ASX listing which has now been shelved) to get Magellan as an investor,” Mr Douglass said of the Guzman y Gomez move.
“I would like to think in the future if people want to sell a non controlling stake in their business and they want Magellan on their register, they will think of us. It is the evolution of Magellan. The vision is to turn Magellan into an investment house where we own long-term interests in some outstanding businesses.”
“There are some other businesses that I really like. They have to be sectors we think have good economics and great growth prospects and they are often unlisted businesses.”
As part of the Guzman y Gomez deal Craig Wright, Magellan’s Head of Governance and Advisory, will join the fast food company’s board.
“We are not wanting it to divert my time other than me deciding with (Magellan CEO) Brett (Cairns) that I like the business. And will we pick up some wonderful intellectual capital. We are thinking about a direct to consumer business in asset management so Guzman y Gomez’s digital strategy is really interesting,” Mr Douglass said.
Guzman y Gomez is expecting sales likely to be up about 30 per cent this year to $400 million.
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