Shares soar in Restaurant Brands after takeover bid

Shares in Restaurant Brands soared yesterday following a takeover bid for the fast food company - but not enough to suggest the market holds out much hope for a competing offer or higher price.

Australian private equity firm CVC Asia Pacific said on Tuesday it intended to make a $1.65-a-share offer for Restaurant Brands, which operates KFC, Pizza Hut and Starbucks in New Zealand, valuing the company at almost $160 million. It also planned to offer about $943,000 for outstanding Restaurant Brands options.

Restaurant Brands shares rose by 25 per cent - 32 cents - to close at $1.60.

Its shares were suspended on Tuesday morning after it said it had received an offer, with CVC Asia Pacific only revealed as the bidder after the close. Before that, the shares were trading at $1.28 each.

ASB Securities head of advisory Stephen Wright said the movement indicated there was doubt any other bidders were in the wings, and little expectation the bid would go higher.

"This is a private equity company - they're going to be fairly hard-nosed," he said of CVC Asia Pacific. "It's not as if they're going to get synergies or want exposure to the industry. You can't say they would never increase the price, but they're going to be hard-nosed."

Until news of the bid broke, Restaurant Brands shares had traded in a narrow range between $1.20 and $1.40 a share for most of the past year. Many in the market believed if a trade buyer was interested in Restaurant Brands, it would have had plenty of time to make a move given the share price had languished for so long.

Wright said he believed most New Zealand investors would be pleased to accept the $1.65 offer price.

"Restaurant Brands generally suffers from poor sentiment in New Zealand to do with fast food and the ups and downs of the restaurant and takeout market," Wright said.

A few uncertainties kept the market price at a 5c discount to the offer. Formal offer documents have not yet been lodged, leaving a chance a condition disliked by the market could yet emerge.

And even if all went smoothly, investors would not receive their money straight away.

Nor do investors know which way major shareholders plan to jump. The company's annual report shows two shareholders with stakes larger than 5 per cent - fund manager AMP Henderson Global Investors and California residents Kevin Douglas and Michelle Douglas. Reports late last year that clients of a Californian sharebroker, Peter Schiff, owned 20 per cent of Restaurant Brands added another unknown element.

Meanwhile, CVC Asia Pacific's managing director, Adrian MacKenzie, told Bloomberg the company planned to "refurbish, redevelop and reinvest money back into the business".

Restaurant Brands said in April it hoped to update its 87 KFC stores over the next five years with a new look that was on trial.

Restaurant rally

* Restaurant Brands' shares closed 32 cents higher in reaction to news of a takeover bid.
* The price indicated little expectation of any competing bid.
* Bidder CVC Asia Pacific has said it plans to "refurbish, redevelop and reinvest" money back into the business