RBD - Restaurant Brands

[Snoopy]

quote:Originally posted by winner69

Question 766679 ...

Think yourself lucky '95663769' that you don't have to deal with the devil 'in-car-n-eight', even if you do have to deal with the devil 'between-seven-nine'.

quote:
I take it RBD would have had to front up with some dosh for the new franchise agreements on 44 KFC stores ... and some more dosh next May for the other 33 KFC stores and all the PH stores.

Any ideas how much? ... wasn't stated in the announcement

This is exactly the question that Graeme Bulling put to the board at the 2003 AGM. They wouldn't give a straight answer, but responded thus:

"We have given careful consideration to how we might meet Mr Bulling's wish for shareholders to know the impact of franchise fee renewals on the Company going forward, without compromising commercial sensitivity and confidentiality of franchise agreements.

We do not disclose per store franchise renewal fees that form part of (any negotiated) arrangements. But shareholders may take as a reference point, the renewal fees disclosed for the original purchase of 122 stores from Pepsi i.e. NZ$55,000 per store adjusted by New Zealand CPI from 1997 top the renewal date in 2007."

I have already covered this issue on page 6 of this thread under the heading:

"Medium Term Effect: PH/KFC Franchise Renewals and KFC refurbishment program."

In that posting I said:

"In addition to the ‘physical rebuilding’, 80 odd KFC stores need their franchises renewed in 2007 (including the 40 just committed to by Restaurant Brands in advance this year). We can add to this total some 40 Pizza Hut stores. At my estimated renewal rate of $80,000 per store, this requires an incremental capital commitment of $9.6m. That equates to an extra (annual) interest bill of $770,000."

766679 (or SNOOPY for those that must use alphabetics)

[Snoopy]

quote:Originally posted by Happy Camper


As an aside snoopy, I know that private equity ran the ruler over RBD last year, and deemed north of $1.60 too expensive. What chance of private equity determining that the numbers stack up now? You would have to assume that they could get their first 20% at a weighted price of around $1.10.

Cheers

Private equity bid $1.65 Happy Camper. It was a firm bid on the undestanding they could get agreement on the KFC and PH renewal clauses from 'YUM'. They couldn't reach an agreement with YUM so the deal fell over. I would imagine that private equity will wait for the franchise agreements to be renegotiated now, before having another go at RBD. That means they will wait another year at least.

I imagine that because YUM have forced RBD to undertake an accelerated store redevelopment program, a private equity opening bid will no longer be at $1.65. If payment of the new store redevelopment program lops around 15% off RBD group profits, and I estimate it does, then expect the next takeover bid to come in at $1.40. Nevertheless even at that, it is a healthy premium over today's market prices.

SNOOPY

[rmbbrave]

Aussies hungry for fast food
03 September 2006
By GARRY SHEERAN

Restaurant Brands' plunging share price has put New Zealand's only listed fast food operator firmly back on the takeover agendas of hungry Australian private equity players, say analysts.


"It's only speculation at this stage, but I'd be willing to bet money on it," said one.

Last week's near 30% fall in share price - Restaurant Brands shares are at an eight-year low of 95c - gives the firm a market capitalisation of $92 million. Private equity player CVC Asia Pacific offered it $160m ($1.65 a share) last year and an offer at $1.20 a share might now be enough to secure the company.

The CVC offer failed because CVC could not agree with US franchiser Yum, which owns the franchise on KFC and Pizza Hut.

But last week's profit warning from Restaurant Brands, and doubts it would be able to maintain its dividend, could see renewed interest from CVC Pacific.

Macquarie Equities investment director Arthur Lim said Restaurant Brands was "seriously on the back foot".

Last month, Restaurant Brands renewed half its KFC store franchises with Yum and the other 50% are due for renewal in May next year, when Pizza Hut franchises also expire.

Lim said whoever took control of Restaurant Brands could, for example, "call Yum's bluff and convert the expiring franchises to Domino's Pizza stores. It's starting to look really appealing".

As well as CVC Pacific, Pacific Equity Partners (PEP), which now owns KFC and Sizzler restaurants in Australia, has also said Restaurant Brands would complement its recently acquired Collins Food Group

[Happy Camper]

Egads, is the penny dropping all over Australasia about the potential arbitrage opportunity that RBD offers at present?

Snoopy, thanks for confirming the theoretical value a potential takeover would occur at. The ego within prefers your ($1.40)valuation to that of Garry Sheeran's ($1.20). I for one would not be a willing seller into a bid at $1.20.

Cheers

[BRICKS]

quote:Originally posted by BRICKS

quote:Originally posted by BRICKS

DONT worry boys the s/price will soon back over $1 those poor soles who dumped over 2 million of there hard earned shares at such a big LOSS will then regret while the traders CHEER.. [8D]

BET all you HARD talkers did not BUY or SELL note that Winger69 never DOE`S.. [8D]

WELL thanks boys all your hard talking [& non buying] is looking GOOD up 10%,, IN China at present may come home to eat some KFC.. [8D]

[duncan macgregor]

Exactly what has RBD got left to sell if the business starts on a downward slide. I like companies that i invest in to have something of substance probabely a throw back to the 87 crash. They sold the buildings whats left to sell?. They are stupid enough to spend millions doing up the landlords buildings so what is left if it all keeps going bad. Nearly all the companies have property as a back up if times get tough, but this lot have very little other than a faultering business. macdunk

[Snoopy]

quote:Originally posted by duncan macgregor

Exactly what has RBD got left to sell if the business starts on a downward slide. I like companies that i invest in to have something of substance probably a throw back to the 87 crash. They sold the buildings whats left to sell?. They are stupid enough to spend millions doing up the landlords buildings so what is left if it all keeps going bad. Nearly all the companies have property as a back up if times get tough, but this lot have very little other than a faultering business. macdunk

RBD have the spoils of three enduring franchise agreements to offer. If they play things right they can exploit the intellectual capital base of the Starbucks, Pizza Hut and KFC. Originally I thought this was *all* they had, which is one of the reasons RBD continue to be priced so cheaply on the market.

Reading those speculative articles in the press over the weekend has got be thinking though. There are over 100 prime high visibility food outlet sites that RBD holds the lease on. Those lease agreements, while being seen as a liability when the business is not going well, could very well be seen as an asset by another fast food chain wanting to break into the NZ market. I think there are restriction of trade agreements in place that says that if RBD does not renew its Pizza Hut and KFC agreements, then it will be precluded from converting those relinquished outlets into competitive takeaway food outlets for a period of time. However it seems unlikely that the reverse is true. Namely that if YUM brands dump Restaurant Brands as their NZ agent, that any restriction of trade to Restaurant Brands could apply.

Perhaps with that 'other' US Pizza chain (who were they again?), seemingly intent on getting into the NZ market, RBD has a bit more bargaining leverage than they thought? If 'YUM' rejects the franchise renewal proposal put forward by Restaurant Brands, any downstream distressed(?) leases could be a very economical way to build a new business of scale in NZ overnight, at the expense of YUM! After all if Pizza Hut took out Eagle Boys a few years back, there may be nothing to stop a new Pizza market entrant dealing to Pizza Hut in exactly the same way.

I wonder if Vicky realises she has a bit more to bargain with than she thought? Or will her training in water sports in her younger years continue to ensure she has the backbone of an amoeba in the upcoming negotiations with YUM? Perhaps a lightning raid on the RBD share register by a competitor looking to get into the NZ market would make sense - soon!

SNOOPY

[BRICKS]

WELL boys we have gone from a profit down turn notice to a death notice where do you people get all this rubbish we have to look at and spit OUT.. [8D]

[duncan macgregor]

quote:Originally posted by BRICKS

WELL boys we have gone from a profit down turn notice to a death notice where do you people get all this rubbish we have to look at and spit OUT.. [8D]

Bricks
Fair questions and answers dont you think?. I asked what has this company has got to sell if things get bad. Snoopy gave me his thoughts you give us yours. Remember they got out of Australia at a substantial loss squandering the money from property sales in NZ.
Think what can happen before or if it does is what investing is all about. macdunk

[Placebo]

I recall once a friend of mine went to a conference in the UK where they were addressed by the Euro head of McDonalds. He got them off-guard when he asked delegates `can anyone tell me what business I am in'. The answer wasn't "burgers" as everyone thought, it was "property". Apparently throughout the world. McD's only has a proportion of its operations in franchises and controls the rest, including owning the shop and the building. In that way they are one of the biggest property owners in the US.

His message was `looks aren't always what they seem'; but it also makes good business sense. And Maccas haven't done too badly for themselves, have they?