Jcorp: Sorry Syed Ali, we had no intention to sell KFC's stake to anyone else

KUALA LUMPUR: There may again be another tussle for control of the KFC fast food business in Malaysia. This time, the Malay Chamber of Commerce Malaysia (MCCM) is challenging a joint bid by Johor Corp (JCorp) and CVC Capital Partners Asia Pacific to acquire the assets and liabilities of QSR Brands Bhd and KFC Holdings (M) Bhd.

The MCCM yesterday said it would make a counter-offer for Kulim (M) Bhd's 54% stake in QSR to “ensure the profitable fast food business remains in the hands of bumiputras.”

Its president, Syed Ali Alattas, told StarBiz that MCCM would offer to buy QSR shares at RM6.90 each, thus beating the RM6.80 per share price offered by JCorp and CVC, which was announced earlier this month.

He said the chamber would talk to several bumiputra-linked funds and companies to seek funding for MCCM's offer. He named Lembaga Tabung Haji, Felda Holdings Bhd, Amanah Saham Mara and Permodalan Nasional Bhd.

When asked if the chamber had approached these organisations yet, Syed Ali said it would do so “sooner or later,” adding that he would send letters to these organisations in the soonest possible time.

Estimating that the exercise would cost about RM1bil, Syed Ali said the chamber would repay the financing by eventually franchising KFC to bumiputera entrepreneurs in Malaysia.

“I want to ensure this valuable franchise remains in the hands of bumiputras as it must not go into the hands of outsiders. They have spent so many years building up this franchise and won the right to this international franchise and now they are selling it away?” he asked.

“Do you want to go my way, which costs only RM1bil or so, or go their way, which will cost RM5.24bil? My way is definitely better.”

He added that he would write to Prime Minister Datuk Seri Najib Razak to inform him about the plan.

"I want to ensure this valuable franchise
remains in the hands of bumiputras "

In response, a JCorp spokesman who did not want to be named said the Johor investment arm would continue to hold a controlling stake in QSR and KFC post-acquisition, adding that it had no intention to sell its stake to anyone else at this point in time.

“This is the exact thing which happened with US-based private equity firm Carlyle Group. We did not sell it to them either. Neither did we sell it to businessman Tan Sri Halim Saad then. Thus, we have no intention to sell our stakes to anyone else. This franchise will remain firmly in the hands of JCorp,” said the spokesman.

In November 2010, JCorp, through Kulim and QSR, rejected takeover bids from Carlyle and Halim's vehicle, Idaman Saga Sdn Bhd. Both offered to buy QSR shares at RM6.70 each.

QSR has a 51% stake in KFC, and also operates Pizza Hut restaurants in Malaysia and Singapore.

JCorp had earlier said it would eventually hold a 51% stake in Massive Equity Sdn Bhd, the vehicle that was meant to take over QSR and KFC, while the remainder of the stakes would be bought over by CVC Capital Partners, a global asset management company.

“Please also remember that the boards of QSR and KFC have categorically said they would not accept any other offers from anyone else. This should be the end of the counter-offer thing already,” the spokesman added.

When asked about the funding for JCorp to see through this deal through, he said it was in the process of arranging the funding. He declined to comment further.

He also refused to say if JCorp would go deeper into debt as a result of this privatisation exercise.

KFC has been embroiled in several corporate tussles in the past two decades. In 1995, for example, the Lau brothers of Leong Hup Holdings Bhd battled with Datuk Ishak Ismail for control of the company.

Kulim's takeover of KFC and QSR in 2005 was initially met with significant boardroom and shareholder resistance as well. And just before that, KFC went through another period of clashes among its directors.