JCorp won't incur more debt over KFC, QSR

The privatisation of KFC Holdings Bhd and QSR Brands Bhd will not result in Johor Corporation (JCorp) incurring additional debt, President and Chief Executive Kamaruzzaman Abu Kassim said today.

"It is because the funding for the transaction will be done via Massive Equity Sdn Bhd (MESB) on the strength of the future cash flow of the two businesses," he said in a statement.

A special purpose vehicle, MESB is a 51 per cent and 49 per cent joint venture owned by JCorp and private equity fund CVC Capital Partners Asia Pacific.

It was reported that JCorp's debt was estimated to total RM6.6 billion while the cost of taking over the two companies was estimated at RM5.2 billion.

Kamaruzzaman said that following completion of the disposal to MESB, the proceeds therefrom would be returned to all shareholders of QSR and KFC.

The move, he said, would also present Kulim, which is currently the controlling shareholder of QSR, an opportunity to dispose its stake in food retail businesses and focus on its core plantation business.

Kamaruzzaman said the acquisition would enable JCorp to gain direct controlling equity interest in both companies, on the firm belief in the fundamentals and long term value of the KFC and QSR’s businesses.

He said JCorp believed that this would also serve the interests of all parties involved.

"JCorp is pleased to say that the proposal has been well received by investment professionals and the public at large," he said.

On the same note, Kamaruzzaman said MESB welcomed yesterday's announcement by the boards of KFC and QSR that they accepted the letter of offer from MESB to acquire substantially 100 per cent of their businesses and undertakings, including substantially all their assets and liabilities.

"The acceptance by the independent directors of both QSR and KFC of MESB’s offer is seen as a testimony that the proposal benefits all shareholders and as an endorsement of a significant part of JCorp Group’s rationalisation plan."

"With this, parties will work towards eventual execution of the relevant agreement for onward approval by the minority shareholders of QSR and KFC," he said.

JCorp announced on Dec 14 that it had served a letter of offer via MESB to both the Board of Directors of KFC and QSR to acquire both businesses.

The acquisition would allow JCorp to streamline the operations, boost efficiencies and grow an enlarged regional food retailing business and most importantly, would see direct returns from investment (as compared to the current situation) and enhancement to the earnings and cash flow of JCorp.

"This comes about from the direct 51 per cent holding by JCorp in the privatised QSR and KFC as opposed to the present situation of indirect 33 per cent shareholding for QSR and 18 per cent for KFC," it said.

The offer was made at a price of RM4.00 per KFC share and RM6.80 per QSR share.

According to JCorp, the proposal to acquire both KFC and QSR was explored for some time and "it is now being implemented at the most opportune time."

"It has the full backing and consent of the JCorp’s Board of Directors, within the larger Group rationalisation plan," it said. -- Bernama