UPDATE 1-Malaysia’s Johor Corp says not selling QSR, KFC

* Johor Corp says not selling QSR, KFC

* CVC, Carlyle had made rival QSR bids; top price $619 mln

* Johor says Maybank, CIMB will advise on 3.6 bln rgt debt

(Adds details, analyst comments, quotes)

By Min Hun Fong

KUALA LUMPUR, Dec 27 (BestGrowthStock) – Malaysia’s Johor Corp,
the state investment arm of the country’s southernmost state
bordering Singapore, has decided it won’t sell its indirect
subsidiaries QSR Brands and KFC Holdings ,
upsetting plans of two rival foreign private equity bidders.

QSR and KFC Holdings, held via Johor Corp’s 53 percent
subsidiary Kulim, have been in the spotlight after receiving
two unsolicited bids to buy the company, both of which
involved foreign private equity firms.

Local tycoon Halim Saad had made a bid for QSR together
with private equity firm CVC Group before the Carlyle
Group made a better offer worth 1.94 billion ringgit
($618.8 million).

“QSR and KFC are not for sale,” Johor Corp’s president and
chief executive Kamaruzzaman Abu Kassim said in a statement.

“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.”

QSR and KFC Holdings have been in the sights of foreign
investors owing to their healthy returns and strong potential
growth prospects in the region and in the under-served fast
food market in India.

QSR is the local franchise operator of U.S.-based Yum!
Brands’ Kentucky Fried Chicken under its 51 percent
subsidiary KFC Holdings.

An analyst told Reuters that bids for QSR could have been
opportunistic gambles in light of a 3.6 billion ringgit ($1.16
billion) debt at the ultimate parent company of both QSR and
Kulim, Johor Corp.

“The PE players must have been expecting a fire sale,” the
analyst, who did not want to be named as she was not
authorised to speak to the media, said.

Johor Corp’s Kamaruzzaman said that plans were underway to
manage the debt, which falls due in 2012. He added that
Maybank and CIMB have been appointed advisers to help
restructure the debt.

TOUGH FOR PE IN SE ASIA

Private equity funds are on the prowl in Southeast Asia
looking for businesses that are geared to the regions strong
economic growth.

Earlier this year, Matahari Putra Prime sold its
majority stake in its department store business to a joint
venture with CVC for $773 million. Still, deals are hard to
come by especially when buyout funds are competing with
strategic players for assets.

“In the past it was easy for PE funds to get leverage to
boost returns, and therefore they could bid up. But now there
is less leverage available,” said one banker who advises on
M&A situations in Southeast Asia.

Carlyle and CVC, for instance, failed to make it to the
last round of bidding for up to $2 billion San Miguel Pure
Foods sale in Philippines. That deal was later pulled.

Earlier this month, Matahari short-listed three strategic
buyers for its planned $1 billion sale of its hypermarket
business, leaving Carlyle and other buyout funds out of the
race.
($1 = 3.095 Malaysian Ringgit)

(Additional reporting by Denny Thomas in HONG KONG)

UPDATE 1-Malaysia’s Johor Corp says not selling QSR, KFC