Mexico's Finaccess dangles 24% premium to buy control of Restaurant Brands

Thursday 18th October 2018

Mexico's Finaccess Capital has offered $881.5 million - a 24 percent premium - to buy three-quarters of Restaurant Brands New Zealand.

The fast-food franchise operator put off paying an interim dividend when announcing today's first-half result, saying it's received a non-binding partial takeover offer from the Mexican company. The $9.45 a share offer is a premium to the $7.60 close yesterday and more than the record $8.15 the company hit in June. The bid values Restaurant Brands at $1.18 billion.

The New Zealand company's board, chaired by Ted van Arkel, who plans to step down next year, recommends shareholders wait until a formal offer is received and a target company statement issued. It said the indicative offer would be adjusted for any dividend payment, so the board hasn't declared an interim payment, but may consider one at a later date.

"There is no guarantee at this stage that agreement will be reached or that Finaccess will advance the proposal to the point where a takeover notice is issued," the company said.

Finaccess Capital's interests include AmRest Holdings, which operates KFC, Pizza Hut, Burger King and Starbucks outlets across Europe and China. Restaurant Brands holds the franchise for KFC, Pizza Hut, and Carl's Jr in New Zealand, and operates KFC franchises in Australia. It also runs Taco Bell and Pizza Hut stores in Hawaii and wants to expand to the US mainland.

Any deal would need approval from the Overseas Investment Office and Yum! Brands, which owns the KFC, Pizza Hut and Taco Bell brands.

Auckland-based Restaurant Brands also reported a net profit of $20.4 million in the 28 weeks ended Sept. 10, up from $19.1 million a year earlier. It affirmed guidance for annual profit of $43 million to $45 million, including the looming sale of its 22 New Zealand Starbucks Coffee stores.

Restaurant Brands' 94 New Zealand KFC stores remain the earnings driver, accounting for $37 million of the group's $69.2 million of earnings before interest, tax, depreciation and amortisation. KFC margins held up at 20.6 percent from 20.7 percent, with product promotions and a new delivery service for some stores boosting sales.

Pizza Hut New Zealand ebitda dropped 30 percent to $1.5 million as the company sold stores to independent franchisees. Margins shrank due to increased wages from the hike in minimum wages. Carl's Jr stores boosted earnings 28 percent to $700,000 as the company shifted its strategy from driving sales through discounts.

The Australian unit boosted earnings 43 percent to $14 million, largely on new store acquisitions. The Hawaiian operations contributed $12.8 million of earnings from the more profitable Taco Bell stores.

(BusinessDesk)

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