Despite Offers, Johor Decides Not to Sell QSR Brands

Despite unsolicited bids from buyout shops CVC and the Carlyle Group, Malaysia’s Johor Corp. will not sell its indirect subsidiaries QSR Brands and KFC Holdings, Reuters reported. Malaysian businessman Halim Saad had joined CVC Group in a bid, which was later topped by a $618.8 million offer from the Carlyle Group.

(Reuters) – Malaysia’s Johor Corp, the state investment arm of the country’s southernmost state bordering Singapore, has decided it won’t sell its indirect subsidiaries QSR Brands and KFC Holdings, upsetting plans of two rival foreign private equity bidders.

QSR and KFC Holdings, held via Johor Corp’s 53 percent subsidiary Kulim, have been in the spotlight after receiving two unsolicited bids to buy the company, both of which involved foreign private equity firms.

Local tycoon Halim Saad had made a bid for QSR together with private equity firm CVC Group before the Carlyle Group made a better offer worth 1.94 billion ringgit ($618.8 million).

“QSR and KFC are not for sale,” Johor Corp’s president and chief executive Kamaruzzaman Abu Kassim said in a statement.

“It would not be a wise business decision to let go of a profitable ‘cash business’ as we would be hard pressed to seek alternative investments that provide similar or better returns.”

QSR and KFC Holdings have been in the sights of foreign investors owing to their healthy returns and strong potential growth prospects in the region and in the under-served fast food market in India.

QSR is the local franchise operator of U.S.-based Yum! Brands’ Kentucky Fried Chicken under its 51 percent subsidiary KFC Holdings.

An analyst told Reuters that bids for QSR could have been opportunistic gambles in light of a 3.6 billion ringgit ($1.16 billion) debt at the ultimate parent company of both QSR and Kulim, Johor Corp.

“The PE players must have been expecting a fire sale,” the analyst, who did not want to be named as she was not authorised to speak to the media, said.

Johor Corp’s Kamaruzzaman said that plans were underway to manage the debt, which falls due in 2012. He added that Maybank and CIMB have been appointed advisers to help restructure the debt.


Private equity funds are on the prowl in Southeast Asia looking for businesses that are geared to the regions strong economic growth.

Earlier this year, Matahari Putra Prime sold its majority stake in its department store business to a joint venture with CVC for $773 million. Still, deals are hard to come by especially when buyout funds are competing with strategic players for assets.

“In the past it was easy for PE funds to get leverage to boost returns, and therefore they could bid up. But now there is less leverage available,” said one banker who advises on M&A situations in Southeast Asia.

Carlyle and CVC, for instance, failed to make it to the last round of bidding for up to $2 billion San Miguel Pure Foods sale in Philippines. That deal was later pulled.

Earlier this month, Matahari short-listed three strategic buyers for its planned $1 billion sale of its hypermarket business, leaving Carlyle and other buyout funds out of the race. ($1 = 3.095 Malaysian Ringgit) (Additional reporting by Denny Thomas in HONG KONG)