No takeaway for QSR bidders

This concluded a process that pulled in the Carlyle Group, CVC Capital Partners Asia Pacific, and even perhaps Kohlberg Kravis Roberts & Co., all of them apparently looking to pay some MYR1.94 billion ($619 million) for the asset, which controls franchises for Kentucky Fried Chicken and Pizza Hut in Malaysia, Singapore and Brunei.

The bidding began when an offer by local tycoon Halim Saad was rejected by indirect QSR stakeholder Johor Corp, the investment arm of the state of Johor (adjacent to Singapore) and majority owner of Kulim. Jcorp is also burdened with debts of about MYR3.2 billion ($1 billion), due and payable in 2012, and investors in the local market indicated to AVCJ that some of the debtors or other parties connected to the holding company may have informally invited Saad to make his bid. After the initial rejection, Carlyle then made its own bid, offering roughly an 18% premium on Saad’s first bid. Meanwhile, Saad’s vehicle Idaman Saga announced a partnership with the CVC Capital Partners Asia III fund and local investment holding company KUB Malaysia Berhad, which entered an even higher bid. Both were finally rejected by Kulim.

“As the company said, they would like to keep the asset with the group,” a spokesperson at Carlyle confirmed to AVCJ, without commenting further.

The QSR business itself is potentially an attractive asset, according to local investors familiar with the Southeast Asian fast foods space. As well as continuing attractive regional growth prospects, especially in India where the platform is still rolling out, the business is cash-generative, able to realize immediate returns from sales while payments for inputs take longer. This makes fast foods a good target sector for GPs seeking to fund LBOs.

However, local business and political networks in Malaysia make for a far from simple acquisition process. QSR and KFC have been described as “a slightly political hot potato,” due to their rich cash yield. Simply making a high bid for the asset might not be the likeliest way to get a result in Malaysia. And, though reasonable, the rival offers from Carlyle and CVC did not represent compelling value to Kulim or JCorp, the local food industry experts aver.

Speculation also surrounds the involvement of KKR, who market talk says might have been seeking to partner with Malaysia’s Employees Provident Fund on its own bid, soon retracted once the extent of opposition to the other PE approaches became clear. KKR spokespeople were unavailable for comment. 

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• Topics
• Southeast Asia
• Consumer
• Regulation
• The Carlyle Group
• CVC Capital Partners
• KKR