Reflections on Volume

Big volume without further upside equals distribution
Big volume without further downside equals accumulation

Volume tends to peak at turning points
Volume often precedes price movement
Volume is a relative study

Wednesday, December 14, 2011

Johor Corp, CVC Capital launch takeover of QSR, KFCH

KUALA LUMPUR (Dec 14): Johor Corporation and CVC Capital Partners Asia III Ltd have teamed up to take over QSR BRANDS BHD [] and KFC HOLDINGS (M) BHD [] (KFCH).

Johor Corp and CVC Capital had on Wednesday, made the offer via a special purpose vehicle Massive Equity Sdn Bhd (MESB) in which Johor Corp holds a 51% stake and CVC Capital 49%.

MESB offered RM6.80 for the shares in QSR Brands Bhd and RM3.79 for the warrants. At RM6.80, this is 80 sen above the closing price of RM6 on Tuesday while the offer price for the warrants was a premium of 77 sen from the closing price of RM3.02.

MESB also made an offer to KFCH of RM4 per share and RM1 per warrant. At RM4, this was 59 sen above the closing price of RM3.41 on Tuesday but five sen below the closing price of RM1.05.

The securities were suspended from trading on Wednesday and resume on Thursday.

Johor Corp owns 55.9% of KULIM (M) BHD [], which, in turn, owns 53.9% of QSR. QSR has a 50.93% stake in KFCH.

Analysts had earlier expected only Johor Corp to take over QSR and KFCH and this did not include CVC Capital’s participation.

“By taking QSR and KFC Holdings private, Johor Corp would have more control and direct ownership over the cash flows and dividends of the crown jewels, KFC and Pizza Hut. QSR and KFC Holdings generate strong operating cash flows of RM250m million to RM300 million per annum but Johor Corp only get to enjoy less than half of it given their current stakes.

“A buyout of QSR and KFCH would increase the amount of dividends and cash flows that Johor Corp enjoys from this top fast food operator,” a research house said.

In December last year, Johor Corp had stated it has no plans to sell its prized assets, QSR and KFCH, which are held through its subsidiary Kulim.

Its president and chief executive Kamaruzzaman Abu Kassim had then said JCorp entered the quick service restaurants business in 2006 (through Kulim’s investment in QSR) and since then has seen tremendous growth in revenue and profit before tax (PBT) at an average of 13.8% and 3.7% per annum respectively.

“The results from this segment had contributed significantly, making up 47.5% and 44.1% respectively to Kulim’s revenue and PBT in the financial year ended Dec 31, 2009.

“It does not make sense to sell our core business,” he had then said in a statement.


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