Tim Hortons China Lands SPAC Deal With Plans For 2,750 Stores: What Investors Should Know

A SPAC focused on the consumer sector has announced the acquisition of a leading restaurant company in China. 

The SPAC Deal: Tim Hortons International Limited, also known as Tims China, announced a SPAC deal with Silver Crest Acquisition Corporation SLCR.

The deal values the company at an enterprise value of $1.69 billion.

The merger is expected to close in the fourth quarter of 2021. Public SLCR shareholders will own 16.4% of the new company.

About Tims China: With a goal of creating a new leader in the high growth consumer sector in China, Tims China is a leading franchisee of the Tim Hortons brand owned by Restaurant Brands International QSR.

The company competes in the quick service coffee market and also offers food selections.

At the end of April, the company had 3.2 million loyalty club members.

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Growth Ahead: The company has a goal of having 2,750 profitable stores by the year 2026. Tims China had 137 stores at the end of 2020. The goal for the company is to have 388 stores at the end of 2021 and 733 by the end of 2022.

Tims China grew from 58 to 199 stores in the last 12 months. The company has over 300 locations in “negotiations,” according to the presentation.

In 2021, the company has already opened 62 new stores and has 65 under construction.

Coffee consumption is low in China but growing. China represents the fastest growing coffee market globally.

The company is growing through digital ordering and delivery services. Digital orders represented 69% of sales in the first quarter of 2021. Delivery represented 35% of sales in the first quarter.

A strong marketing push and growing brand awareness could also help the company gain market share in the coffee market.

Financials: Same store sales were up 42.5% for Tims China in the first quarter of 2021. The company has been profitable on a store level for 15 consecutive months.

Company EBITDA grew at a compounded annual growth rate of 202% from the fourth quarter of 2019 to the first quarter of 2021.

Tims China had revenue of $206 million in fiscal 2020 and is forecasting revenue of $671 million in fiscal 2021.

From fiscal 2021 to fiscal 2026, the company sees revenue growing at a compounded annual growth rate of 63%.

SLCR Price Action: SLCR shares were up 0.41% at $9.81 at last check Monday.