Dunkin’ Donuts exit reflects consumer appeal

Barely three weeks after CVC Capital Partners and Malaysian state investment arm Johor Corp. won board support for their MYR5.24 billion ($1.65 billion) offer for QSR Brands and KFC Holdings, Navis Capital exited its stake in Thailand's Dunkin' Donuts and Au Bon Pain for THB1.32 billion ($41.6 million).

The Asia-focused private equity firm acquired a controlling stake in the business through its fourth fund at an enterprise value of THB775 million in 2006. The sale of the asset to local firm Sub Sri Thai (SST) generated an approximately 2.45x return on Navis' initial investment.

David Ireland, a Navis partner based in Thailand, tells AVCJ that Dunkin' Donuts and Au Bon Pain was weighed down by slow growth in the first couple of years due to political instabilities and low consumer confidence, but started to achieve a clear pick up by 2009. "We knew the situation was temporary and believed the market in Thailand would go strong," Ireland says.

During its ownership period, Navis doubled Dunkin' Donuts and Au Bon Pain's revenues and EBITDA by expanding the brands combined store network from 150 to 263 outlets.

The private equity firm made an internal decision to exit the business last year and put together a list of target buyers. SST wasn't included and only came into the reckoning when it approached Navis directly. The company principally operates in the warehouse and harbor businesses, so it presumably has the supply chain expertise that underpins most large fast food businesses. It won out thanks to industry-focused business strategies and an attractive offer price.

Thailand has at times suffered by comparison to the opportunities presented by Indonesia but there has been a stream of profitable exits from the country in the past year. The restaurant and tourism business is one of three seen as having particular appeal, alongside healthcare and auto parts. Ireland notes that rising disposable incomes across Southeast Asia have boosted the growth of some leading fast-food brands.

Nick Bloy, Navis' managing partner, says the deal represents a continuation of successful exits over recent months - and at good valuations despite difficulties in the M&A market.

In November of last year, Navis also sold Singapore-based King's Safetywear, a portfolio company since 2008, for an enterprise valuation of S$430 million ($338 million). The IRR was well above 50% (4-5x money multiple).

Ireland denies that it is in exit mode, saying that it is actively investing its sixth fund, which closed at $1.1 billion in 2009, and looking for exits when appropriate. "We are more on the exit side, though, as we have an increasing number of companies that have been invested for a couple of years already," he adds.

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• Topics
• Exits
• Consumer
• Southeast Asia
• Navis Management
• Consumer
• Exit
• Trade sale
• Thailand
• Southeast Asia