Barefoot Investor: JCorp rejects takeover offers

Johor Corp (JCorp), the ultimate shareholder of KFC Holdings (M) Bhd (KFCH), has turned down takeover bids for the fast-food company from US-based private equity firm Carlyle Group and tycoon Tan Sri Halim Saad.

In separate announcements to Bursa Malaysia yesterday, Kulim (M) Bhd said it had rejected the offer from Carlyle, while QSR Brands Bhd said it had turned down the revised offer from Idaman Saga Sdn Bhd (a vehicle of Halim) which teamed up with KUB Malaysia Bhd and CVC Capital Partners Asia III Ltd.

JCorp has a 53% stake in Kulim, which in turn, owns a 57.5% stake in QSR. QSR has a 50.6% stake in KFCH, the local franchisee of the KFC and Pizza Hut brands owned by Yum! Brands Inc. KFCH operates these brands in Malaysia, Singapore and India.

JCorp's rationale for not selling QSR and KFCH was for the simple reason that it saw longer term value in these assets.

The board views the businesses of QSR and its subsidiaries as part of the key entities within the Kulim group, Kulim said.

As QSR and its subsidiaries are currently experiencing robust growth, the board believes that more value can be realised in the long term and therefore the companies should be retained within the group, it said.

JCorp's rejection of the offers, however, raises the question, why were the bids made in the first place?
Since speculation of a takeover bid for KFCH first surfaced early this month, share prices of QSR and KFCH have gone up by 18.8% and 6.5%, respectively.

Carlyle and Idaman Saga had been in competition for the control of QSR's entire business, including the undertakings of all its subsidiaries, since early this month.

Both were offering RM6.70 apiece for the shares in QSR. At that price, the offer was said to value QSR at about 20 times its forward earnings.

While Carlyle had pitched its offer to parent company Kulim, Idaman Saga and its allies pitched theirs directly to QSR.

The original offer made by Idaman Saga and its partners was RM5.60 for each QSR share. The group raised its offer to RM6.70 apiece yesterday to match the offer made by Carlyle, only to be turned down.

Trading in Kulim, QSR and KFCH shares was suspended for half a day yesterday afternoon. Trading in the counters will resume today.
(Source: The Star Online)


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