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CVC and Johor bid for Asia fast food operators

by Paul Whitfield  |  Published December 15, 2011 at 12:42 PM ET
CVC Capital Partners group has teamed with Malaysian sovereign wealth investor Johor Corp. to bid 5.24 billion Malaysian ringgit ($1.6 billion) for KFC Holdings (Malaysia) Bhd., and QSR Brands Bhd, operators of more than 950 fast food outlets principally in Malaysia and Singapore.

The partners said Thursday, Dec. 14 they are bidding through investment vehicle Massive Equity Sdn Bhd, which is 51% owned by Johor and 49% owned by CVC Capital Partners Asia III Ltd. The bid comes just over a year after Johor pulled plans to offload QSR, in which it indirectly controls an about 59% stake, after rejecting offers from Washington-based Carlyle Group and a second consortium including CVC Capital Partners.

"Given the current outlook and volatility of the equity markets, both the KFC and QSR offer prices are considered attractive," Johor Corp said in a statement.

Johor Corp., the investment arm of the Malaysian state of Johor, described the bid as part of a plan to simplify its investment portfolio, noting that the acquisitions will 'flatten its vertical corporate structure and reduce its multiple listings, resulting in better governance and greater operational efficiency which will drive both growth and long-term value."

Massive Equity is offering RM4 per share for KFC Malaysia shares, a 17% premium to the company's most recent closing price of RM3.41. It is concurrently bidding RM6.80 for QSR, a 13% premium to the target's closing price of RM6. The bidders are also offering RM1 for each KFCH warrant and RM3.79 for each QSR warrant.

QSR owns 50.64% of KFC Malaysia's equity and is in turn 59% owned by Kulim Malaysia Bhd, which is 57.05% owned by Johor.

The bids for QSR have been pitched at a slim premium to the RM6.70 per share offers from Carlyle and CVC, which were rejected as too low by Johor in November 2010.

KFCH has about 620 KFC restaurants in Malaysia, Singapore, Brunei, Cambodia and India, according to the QSR website. It also operates 29 RasMas restaurants and 55 Kedai Ayamas outlets in Malaysia and Brunei, while QSR operates about 260 Pizza Hut restaurants in Malaysia and Singapore.

The bid for KFCH values the business at about RM3.17 billion, excluding the warrants, and values QSR's equity at about RM2.06 billion. That equates to about 20 times KFCH's 2010 earnings and 17 times QSR's earnings over the same period. The offer expires on Dec. 21.

KFCH and QSR will appoint advisers to study the offers, the companies said in separate statements. The bid partners are taking advice from Malaysia's CIMB Investment Bank, a unit of CIMB Group.