JCorp shuts door on Malay chamber’s QSR bid

By Debra Chong

December 29, 2011

DPMM says it would increase KFC revenues by franchising outlets to Bumiputera entrepreneurs. — Reuters pic

KUALA LUMPUR, Dec 29 — State-owned Johor Corporation Bhd (JCorp) rebuffed today the Malay Chamber of Commerce Malaysia’s (DPMM) bid to buy up Kulim Bhd’s entire stake in QSR Brands Bhd to protect Bumiputera interests in KFC Holdings Malaysia Bhd (KFCH).

“JCorp does not want to sell to outsiders. Full stop,” a JCorp spokesman told The Malaysian Insider when contacted today.

The representative, who asked not to be named as he is not authorised to speak on the matter, said both the management of QSR and KFCH had issued statements on December 21 saying they accepted the offer from Massive Equity Sdn Bhd and had no intention to seek alternative bids.

JCorp holds a 53 per cent stake in plantation company Kulim, which owns 57.5 per cent of QSR; the latter has a 50.6 per cent stake in cash cow KFCH.

Massive Equity is a special purpose vehicle set up under JCorp and its partner, global private equity firm CVC Capital Partners Asia Pacific, to privatise KFCH and QSR for an estimated RM5.24 billion, or RM4 per KFCH share and RM6.80 per QSR share.

The source said the deal would be presented for approval at the companies’ EGM in March next year.

He added that the Carlyle Group and Tan Sri Halim Saad had also in the past offered to buy up shares for the money-spinning fast-food line, but JCorp turned them down in order to keep KFCH within the group.

“Why keep in the group? JCorp is Johor’s investment arm and its key aim is to look after Bumiputera interests.”

Earlier today, DPMM president Syed Ali Alattas said the chamber was willing to match the RM6.80 per QSR share offer and may go up to RM6.90 per share.

“It stops it from going into the hands of outsiders...,” he told reporters at the chamber’s office here.

“What we’re talking about here today is justice. We want all Malaysians to practise justice.”

He said the chamber would borrow to raise the needed cash, as well as approach Tabung Haji, Felda and Amanah Saham Mara to help finance the bid, expected to cost over RM1 billion.

Bernama, quoting an unnamed analyst, reported earlier this month that Felda was keen on buying JCorp’s share in QSR and KFCH.

Syed Ali also said DPMM would send a letter to Prime Minister Datuk Seri Najib Razak today announcing its interest in buying Kulim’s stake in QSR.

DPMM will recover the funds by franchising KFC to Bumiputera entrepreneurs who have expressed interest in the brand, he said.

“Once we franchise, the average KFC franchise is about RM500,000. With 1,000 outlets, that’s... good generation of income,” he said.

Syed Ali added that if Kulim did not wish to sell its stake in QSR to DPMM, the chamber would be willing to work with them to manage the unit.

JCorp recently partnered private equity fund CVC to buy Kulim’s entire stake in QSR and KFCH which, the state investment agency said, would help address its 2012 debt obligations.

The proposed acquisition would also mark a step towards completing the rationalisation exercise being undertaken by JCorp, which would see Kulim exit the fast-food business to focus on its core plantation business.

The independent directors of both QSR and KFCH have approved the buyout offer and the companies will now have to call an EGM where at least 75 per cent of non-interested shareholders will have to vote in order for the deal to go through.

JCorp said the acceptance by directors was testimony that the proposal benefits all shareholders and an endorsement of JCorp’s rationalisation plan.

It added that the privatisation will not result in JCorp itself incurring more debt as funding for the transaction will be done on the strength of the future cash flow of the two businesses.