QSR, KFC not for sale

PETALING JAYA: Speculation about Johor Corp Bhd's (JCorp) plan to divest its stakes in QSR Brands Bhd and KFC Holdings (M) Bhd was put to rest yesterday after the state investment company reiterated it has no plans to sell those prized assets.

“QSR and KFC are not for sale,” JCorp president and chief executive Kamaruzzaman Abu Kassim said in a statement, adding that it did not make sense for the company to sell its “core business”.

JCorp's stakes in QSR and KFC are held through its 53%-owned subsidiary Kulim (M) Bhd. Kulim owns 57.5% in QSR, which in turn owns 50.6% of KFC.

JCorp said it considered QSR and KFC, which it acquired in 2006 after winning a high-profile, tightly-contested tussle for control in both the companies, as “valuable and strategic assets”. JCorp said this is because these companies had contributed to its revenue growth and profitability.

It was estimated that since its acquisition of QSR and KFC in 2006, the group has seen revenue and profit before tax growing at an average of 13.8% and 3.7% per annum respectively.

“The results from this segment had contributed significantly to the group, making up 47.5% and 44.1%, respectively, to Kulim's revenue and profit before tax in the financial year period ending 2009,” Kamaruzzaman explained, adding that JCorp believed QSR and KFC would continue to be a growth catalyst for the group.

“It would not be a wise business decision to let go of a profitable “cash business” as we would be hard pressed to seek alternative investments that provide similar or better returns,” he said.

JCorp's clarification was issued in response to recent media report that the company was desperate to sell some of its strategic assets such as QSR and KFCH as part of its restructuring plan and also to meet its debt obligations.

As at Dec 31, 2009, JCorp's debt burden stood at more than RM6bil, out of which, RM3.6bil was due for repayment in July 2012.

But Kamaruzzaman maintained that Jcop's debt obligations were manageable and that the group had no problems in meeting them. He added that there was already a debt-restructuring programme in place and that it would be executed as part of JCorp's transformation plan.

It was also revealed in JCorp's statement that CIMB Bank Bhd and Malayan Banking Bhd, which owned the bulk of the group's debt, had been appointed as its financial advisers.

“JCorp is categorically saying there's not going to be a sale of QSR/KFC, which will be welcomed by the market, considering the rumours that had been lingering. It also gives the impression that the new leadership at JCorp are putting things in order,” says an analyst.

To recap, JCorp was thrown into the limelight recently when it received three offers for QSR (with the lucrative KFC business being the obvious target). The offers came from several big names in private equity, including the Carlyle Group and CVC Capital, but JCorp eventually turned them all down.

It was speculated that the man who first mooted the idea of selling QSR and KFC was JCorp's former president and chief executive officer Tan Sri Muhammad Ali Hashim. Muhammad Ali resigned from JCorp in July. Even so, he still held the chairmanship and directorship in several companies in JCorp's stable. These include Kulim, QSR and KFC, as well as other prized assets such as KPJ Healthcare Bhd, Sindora Bhd, Johor Land Bhd and Damansara Realty Bhd. JCorp has already called for several EGMs to be held early next year seeking the removal of Muhammad Ali from these companies.

Muhammad Ali however recently told the media that the recent proposed moves to remove him from the boards of JCorp's stable of companies would likely result in a stripping of assets and businesses of QSR and KFC 'under the unconvincing pretext'' of raising cash to resolve the group's debt issues. He is reported to have also said: “I have made it the mission of my life-long career to oppose any move to privatise any (of) JCorp's interests.”

But yesterday's statement by JCorp clearly indicates that it is not selling QSR and KFC. It is left to be seen, though, how JCorp will restructure its RM3.6bil debt.

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