CVC may face competition for Restaurant Brands bid

Restaurant Brands bidder CVC Asia Pacific could face competition from two other parties, the fast food operator's chairman said yesterday.

"There are other parties that have observed that we may be undervalued and they have continued contact with us," Bill Falconer said after the company's annual meeting in Wellington.

He would not name the two nor say whether they were local or foreign firms. The relationship with them was at a "very early" stage.

On Tuesday CVC Asia Pacific gave notice of its intention to offer $1.65 a share for Restaurant Brands, which runs the New Zealand KFC, Pizza Hut and Starbucks Coffee outlets. The offer values the company at $159.8 million.

Restaurant Brands' shares, floated at $2.20 in 1997, were trading at $1.28 before the offer. Yesterday they rose 3c to $1.63.

Tower fund manager Paul Robertshawe said CVC Asia Pacific's bid was the catalyst for anyone who had run the rule over Restaurant Brands in the last two years to do something. Robertshawe expected any further bids to come from private equity funds or to be leveraged buyouts.

Falconer said CVC Asia Pacific had a number of issues to address before submitting an offer to shareholders and had 30 days from June 11 to do so. Among those issues is the ongoing relationship the bidder expects to have with Restaurant Brands' franchisors.

The board expects a report from independent valuers Grant Samuel on the merits of the bid within two weeks and aims to send out a target company statement with CVC Asia Pacific's offer. In the meantime, Falconer recommended shareholders take no action.

"Obviously, a different outcome could arise if a notice of intent were received from another party in the interim," Falconer said.

He also said it was "not an impossible plan" for the company to lift annual profit to $17 million within three to four years. In the year to February 28, Restaurant Brands posted profit of $10.7 million.

Robertshawe said Falconer appeared to be saying the board had as much confidence as it ever had that earnings were going to increase and $17 million profit within four years was not out of the question.

"In which case this bid won't look all that attractive," said Robertshawe.

Furthermore, if two other independent parties think the company is worth more than its market value, "that's very encouraging for shareholders".

Falconer said the CVC Asia Pacific bid was unsolicited but followed events in Australia, where the recent Domino's Pizza float and sale of KFC operator World Wide Restaurants made Restaurant Brands look undervalued.