LTH’s decision can make or break the QSR-KFC privatisation offer

Bankers say the fund is likely to be invited to provide debt facility in the privatisation of KFC
KUALA LUMPUR: Lembaga Tabung Haji (LTH), the largest single minority shareholder of KFC Holdings (M) Bhd with a 23% stake, is likely to hold the key to the proposed privatisation deal of the fried chicken retailer.
Sources
said that LTH had reached a preliminary consensus decision in a
management meeting to discuss the deal which was expected to be
finalised before the end of the year.
However, the people who were familiar with the outcome of the meeting yesterday were tight-lipped about what had transpired.
“Those who had already gone on their year-end leave were asked to return by the management just to discuss this deal.
[You must be registered and logged in to see this image.] LTH’s decision can make or break the QSR-KFC privatisation offer.(Picture shows LTH headquarters in Kuala Lumpur.)
“KFC
is an important part of our holdings given its exposure in the Asian
fast food market. On the surface, its strategies for growth are
impressive,” said a source.
Meanwhile, investment bankers said
that LTH could be invited to participate in the provision of debt to the
newly privatised entity, in a move that might act as a sweetener for
the fund to accept the buyout offer.
The bankers added that
whether or not this would materialise would be known at a later stage
and that if it did take place, the debt facility would be one which is
attractive and acceptable for all stakeholders.
“Corporate debts
are a good way to avoid the risks and volatility of the equity markets.
It will ensure a creditor still possesses a level of exposure to
participate in the growth of a company despite it being delisted,” said a
spokesperson of a local bank- backed investment bank.
Such
arrangements were not new in Malaysia. There was a case where a fund
sold out in a buyout exercise surfaced again not just as a creditor to
the delisted entity but also an equity holder.
This occurred when MMC Corp Bhd privatised Malakoff Bhd
in 2007. The Employees Provident Fund, which had a 12% stake in the
listed Malakoff, ended up with a 30% stake in the delisted entity soon
after the privatisation.
While market observers did not discount
the likelihood of this happening, they pointed out that pricing was
still the key for this deal to go through. It would need 75% of minority
shareholders' approval.
LTH is the third single largest shareholder in KFC's warrants with a 3.36% stake as at March 2011, its annual report showed.
Its decision could make or break the QSR Brand Bhd (QSR)-KFC
privatisation offer. If LTH should disagreed with the offer, despite
being only a shareholder in KFC, the privatisation deal for QSR would
not be successful. Other shareholders in KFC were local and foreign
funds with the biggest holding a 2.78% stake. QSR's single largest
minority shareholder has 4.91% stakes parked under a US-based fund named
Smallcap World Fund.
The offer to privatise both QSR and KFC
would remain open for acceptance over three working days until tomorrow
after which it would lapse and be withdrawn, KFC said in a filing with Bursa Malaysia.