Domino's Pizza Enterprises, arguably the most expensive stock on...

Domino's Pizza Enterprises, arguably the most expensive stock on the ASX, may eventually have some competition.
Street Talk has learned that Allegro Funds, a Sydney-based private equity firm which specialises in turnarounds, is close to gobbling up ailing pizza chain Eagle Boys and Pizza Hut Australia.
Allegro is understood to be one of two private equity firms that had been circling the chains in recent months, talking to the Eagle Boys' major shareholder, NBC Capital, and Pizza Hut's parent, YUM! Brands.
While its rival lost interest, Allegro moved in when Eagle Boys' head franchisor went into voluntary administration last month.

There's been no announcement from Eagle Boys' administrators, SV Partners, but Street Talk understands Allegro is in advanced talks to buy both Eagle Boys and Pizza Hut Australia with a view to merging the pair and creating the second largest pizza chain in Australia.

Eagle Boys has 114 stores and less than 10 per cent of the $3.7 billion pizza market and Pizza Hut has 270 stores or about 20 to 25 per cent.
About 13 company-owned Eagle Boys stores in Queensland, NSW and Western Australia closed late last month, reducing the number of outlets to 114 compared with 340 at the peak a few years ago.
A merger with Pizza Hut would boost store numbers to almost 400 and increase the group's market share to about 30 per cent.

That's still well short of Domino's 600-odd stores in Australia and 50 per cent market share.
However, the increased scale and buying power of the merged group, combined with investments in technology, would give it a fighting chance.
Delivery Command, the company that designed the uber-like driver tracking technology used by Domino's to speed up pizza deliveries, has offered its latest technology to Eagle Boys franchisees.
It's unclear at this stage whether Eagle Boys' franchised stores, most of which are in regional areas, would be rebranded Pizza Hut or whether Allegro would operate a two-tier brand structure.

Nevertheless, a deal would come as a huge relief to Eagle Boys franchisees, who would otherwise be facing an uncertain future.
Allegro, which owns Carpet Court, bus maker Custom and Great Southern Rail, will likely seek to exit its investment in pizza in a few years through an initial public offering.
The private equity firm will no doubt be hoping that investors will not have lost their appetite for pizza.
Domino's shares have risen a staggering 83 per cent over the last 12 months, reaching a record $75.25 on Monday, and the stock is nowtrading on a forward P/E of 70 times.


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