Mexican-themed fast food chain Guzman y Gomez will seek an IPO

In one of the most highly anticipated Australian sharemarket floats for years, fast-food chain Guzman y Gomez will launch its IPO in June in the biggest float since 2018.

Guzman y Gomez, the Mexican-themed fast-food chain known for its brekkie burritos and $3 tacos, has lit the fuse on the biggest ASX float since 2018 as it seeks to lure new shareholders on its promise of fast-food domination.

In one of the most highly anticipated sharemarket floats in years, Guzman y Gomez will raise $242.5m in an IPO that will value the restaurant chain at $2.2bn.

It makes the fast-food chain an unlikely candidate for the biggest float in recent years amid in a sharemarket typically dominated by capital raisings from miners, ­financial services and traditional industrials.

Under the details issued within the prospectus, its largest shareholder, TDM, will cash in about $12m worth of shares but will still be the company’s largest investor, with its stake falling from 33 per cent to 29.7 per cent upon listing.

Founder Steven Marks will cash in about $9m but will still have just under 10 per cent of the listed company, worth about $220m upon its sharemarket debut.

Mr Marks said it was the right time to push the button on an IPO despite increasingly volatile global equity markets and pressures on consumers. Guzman y Gomez had proved resilient through tougher trading conditions and weaker consumer sentiment.

“If it was fine dining, it would be a different story, but we are very comfortable in the fast-food landscape. And that’s where obviously you’ll see revenue increasing and comparative store sales increasing,” he said.

“But we think we are in a sweet spot. Whether interest rates are higher or lower, we see people trading down into fast food and we’re not really concerned at all.”

Investor appetite for Guzman y Gomez has been strong, putting a rocket under its valuation. Less than two months ago the chain ­attracted four new institutional investors – Cooper Investors, ­Hyperion Asset Management, Firetrail Investments and QVG Capital – to its register in a $134.5m liquidity round that gave the Mexican food chain a $1.73bn ­valuation at the time.

The $2.2bn valuation for Guzman y Gomez – which opened its first store in Sydney in 2006 and now has 210 restaurants across four countries, including 185 in Australia and four in the US – will mark it as the biggest IPO since Viva Energy’s debut in 2018.

On Friday, Guzman y Gomez released its prospectus and announced it expected to list on the ASX on June 20, via a fully underwritten initial public offering of 11.1 million shares at $22 a share.

It hopes to raise $242.5m, including $200m in primary proceeds and $42.5m of a secondary selldown on behalf of select existing security holders.

Shares might be hard to get for outsiders as it is not a general public offer, with scrip offered to float brokers, handled by Barrenjoey and Morgan Stanley, as well as some allocation given to employees and franchisee owners.

Guzman y Gomez comes to the market with a heavy-hitting board and share register that have helped navigate the group’s journey over the past decade.

It has opened stores in Singapore and Japan and set its sights on overtaking McDonald’s in terms of store numbers in the domestic market.

Guzman y Gomez is currently making losses, recently posting a tripling of its interim loss to $3.96m for 2024.

However, a 31 per cent surge in sales to $471m has resulted in the company’s prospectus forecasting a statutory net loss of $14.2m in 2024 and bounce back to a $6m profit in 2025.

Much of the losses are flowing from $17m in costs related to the IPO, as well as large investments back into the business.

An expansion further into the US as its brand starts to resonate with Americans is planned, along with a push into Asia, while accelerating its store openings in Australia to catch up to the 1000 stores operated by McDonald’s.

“We truly believe that fast food doesn’t have to be bad food and we look forward to sharing our food with more guests across Australia and overseas as we look to realise the opportunity we have to grow our network to more than 1000 restaurants over the next 20-plus years,” Mr Marks said.

Guzman y Gomez will float on the ASX in June. Picture: Glenn Hampson

Co-CEO Hilton Brett said Guzman y Gomez had a strong operational and financial track record, with global network sales increasing from $101m in 2015 to $759m in 2023.

Sales for the chain are expected to hit $1.138bn by 2025.

In Australia, Guzman y Gomez expects to open 30 new restaurants in the 2025 fiscal year and believes it has substantially built the team, restaurant pipeline and infrastructure to increase this to 40 restaurants a year within five years. The focus will be on drive-through restaurants due to their potential to deliver superior restaurant economics, it says.

Along with strong growth ambitions, Guzman y Gomez will also have a rich fast-food and retailer pedigree when it comes to the public market. The publicly listed Guzman y Gomez will be chaired by Guy Russo, the former CEO of McDonald’s Australia and president of McDonald’s, Greater China, with the experienced retailer also once the boss of discount department store Kmart in Australia.

Alongside him are co-CEOs Mr Marks, Guzman y Gomez’s founder, and veteran retailer Mr Brett. Also on the board will be Jacquie Coombes, who has held senior executive positions at the Wesfarmers-owned Bunnings as well as Spotlight, as well as ­Marina Joanou, who has more than 20 years’ experience in the retail industry, with the majority of her corporate career at Wesfarmers.

Steven Marks (R) and Hilton Brett, both co-CEOs of Guzman Y Gomez. Picture: Supplied

Long before outside investors, or retail shareholders, will get a chance to buy shares in a listed Guzman y Gomez, the restaurant group has been a favoured investment for some of the nation’s largest private equity, funds managers and superannuation funds, which have poured money into the company at various stages and capital raising rounds.

Apart from the new institutional investors in April, other existing and long-running large institutional shareholders in the fast-food company have included TDM Growth Partners, now its largest shareholder, and Barrenjoey Private Capital. They will both retain significant investments in Guzman y Gomez post-IPO.

Alongside him are co-CEOs, Guzman y Gomez founder Mr Marks, and veteran retailer Mr Brett. Also on the board will be Jacquie Coombes, who has held senior executive positions at Bunnings, owned by Wesfarmers, and Spotlight, as well as Marina Joanou who has more than 20 years’ experience in the retail industry with the majority of her corporate career at Wesfarmers, where she held positions including boss of Target Australia, CFO of Wesfarmers department stores (Kmart and Target), CFO of Kmart and chair of Kmart Tyre and Auto.

Long before outside investors, or retail shareholders, will get a chance to buy shares in a listed Guzman y Gomez the restaurant group has been a favoured investment for some of the nation’s largest private equity, funds managers and superannuation funds who have poured money into the company at various stages and capital raising rounds.

Guzman y Gomez founder and co-CEO Steven Marks.

Apart from the new institutional investors in April, other existing and long running large institutional shareholders in the fast-food company have included TDM Growth Partners, now its largest shareholder, and Barrenjoey Private Capital. They will both retain significant investments in Guzman y Gomez post-IPO and have committed to a voluntary escrow through to the release of the fiscal 2025 results.

Under the details issued within the prospectus, its largest shareholder TDM will cash in around $12m worth of shares but it will still be the company’s largest investor with its stake slipping from 33 per cent to 29.7 per cent upon listing. Founder Mr Marks will cash in around $9m and Mr Russo will sell down $8m worth of stock. Mr Marks will still have just under 10 per cent of the listed company, worth around $220m upon its sharemarket debut.