Restaurant Brands to buy 70 California stores for US$73m

The acquisition includes 59 KFC stores and 11 combined KFC and Taco Bell stores. Photo / AP

Restaurant Brands is to pay US$73 million ($110.6m) for 70 KFC and Taco Bell stores in Southern California as part of its US expansion plan.

The acquisition includes 59 KFC stores and 11 combined KFC and Taco Bell stores as well as a head office facility. It is subject to the approval of Yum!, the owner of the KFC and Taco Bell brands, and also needs landlord approval for the assignment of store leases. Settlement is expected by March next year.

"This acquisition provides Restaurant Brands with immediate critical mass and a capable and stable organisation in California from which we can further expand," said chief executive Russel Creedy in a statement.

The stores have annual turnover of US$95m and a 12-month trailing store earnings before interest, tax, depreciation and amortisation, before general and administrative costs, of more than US$12m.

Restaurant Brands, which expanded into Hawaii in 2017, said it will offer continued employment on existing terms to all 1,100 part-time and 500 full-time staff employed by the franchisee.

"The acquisition brings with it some very experienced and committed employees who we welcome to the Restaurant Brands family and we look forward to building the business further with them in what is a market with considerable potential for future growth," Creedy said.

The purchase price is before "capital expenditure reimbursements for recent store refurbishment and customary working capital adjustments" and will be fully debt funded.

"The company is currently completing a refinancing exercise to, amongst other things, add extra capacity to its borrowing facilities," the statement said.

In its first-half report, Restaurant Brands said it had net debt of $109.8m at September 9 and total bank debt facilities of $258m in place. Total assets at balance date were $882m.

Restaurant Brands chair Jose Pares said this is the next step in the company's growth strategy. "The acquisition provides us with a solid beachhead in the US with significant opportunities for further development."

Restaurant Brands operates KFC, Pizza Hutt, Taco Bell and Carls Jr fast-food stores and has operations in New Zealand, Australia and Hawaii. Its major shareholder is Mexico-based Finaccess Capital with 75 per cent.

Restaurant Brands shares are unchanged at $12.30 today and have gained 47.3 per cent year to date.