QSR Brands Turns Away PE Firms

After entertaining bids from The Carlyle Group and from Idaman Saga, an entity backed by buyout fund CVC, Malaysia’s Kulim has turned down all offers for QSR Brands, which owns the lucrative KFC and Pizza Hut franchise in Malaysia, Reuters reported. Kulim is a majority shareholder in QSR Brands. Shares in QSR fell roughly 11% Tuesday, a day after the news was released.

(Reuters) Shares in QSR, which owns the lucrative KFC and Pizza Hut franchise in Malaysia, plunged as much as 11 percent on Tuesday, a day after the firm’s majority shareholder Kulim rejected a 1.94 billion ringgit ($615.4 million) bid by private equity firm Carlyle Group.

QSR’s board also turned down a proposal from Idaman Saga, a company linked to Malaysian tycoon Halim Saad and backed by a private equity fund run by CVC, which revised its offer to match Carlyle’s.

Malaysia’s Kulim is unlikely to entertain further bids for its 57.5 percent-owned subsidiary, fast-food operator QSR Brands, analysts said.

A bid by Carlyle would have been Malaysia’s largest foreign private equity deal, but Kulim’s board was unanimous in its decision to turn down the deal.

“We gather from management that QSR and KFC Holdings will remain within Johor Corp, at least for now, a decision that we believe was swayed by the growth potential in India,” CIMB Research said in a note to clients on Tuesday.

Kulim and QSR are both units within Johor Corp, the state investment arm of the country’s southernmost state bordering Singapore.

According to media reports, Johor Corp has about 3.6 billion ringgit ($1.14 billion) in borrowings falling due in 2012, which analysts say could have prompted the approaches to buy QSR.

QSR’s shares had surged to an all-time high of 6.26 ringgit per share on Monday, before the stock was suspended and Kulim announced it would reject Carlyle’s offer.

QSR shares resumed trade on Tuesday and fell as low as 5.63 ringgit, suffering their biggest fall in two years.

At 0450 GMT, the shares had recovered to 5.89 ringgit, but were still down 6 percent.

KFC Holdings , which is the franchise licensee of the fastfood chain Kentucky Fried Chicken in Malaysia, is seen as the most attractive assets within QSR’s stable of companies.

The operator of the brand belonging to U.S. Company Yum! Brands was recently granted permission to operate outlets in the relatively under-served fast food market in Mumbai, India.

“KFC has enough firepower on their own to grow,” said an analyst. “It’s better for the shareholders to keep the current business than to cash out now as it’s on the brink of going to the next level.”

The analyst added that he expected earnings from India to start coming in by 2012. The analyst asked not to be named because his brokerage has a policy of not speaking to the media.

Neither Kulim nor QSR could be reached for comment. ($1 = 3.153 Malaysian Ringgits) (Reporting by Min Hun Fong)