The partial takeover offer for Restaurant Brands has come out of the blue and bucks the trend of recent offers which have typically been for companies seen as having poor performance.
This week Mexico's Finaccess Capital offered $881.5 million — a 24 per cent premium — to buy 75 per cent of Restaurant Brands New Zealand, which operates KFC and Pizza stores in New Zealand.
The $9.45 a share offer is a premium to the $7.60 close on Wednesday and values Restaurant Brands at $1.18 billion.
Mohandeep Singh, an analyst with Craigs Investment Partners, said unlike other recent takeover offers, such as Steel & Tube and Tegel which had operating issues and share prices under pressure, Restaurant Brands had good management, a fully-priced share price and strong shareholder support for its strategy.
"It is not your usual takeover target," he said, "It is definitely a surprise from that point of view."
The deal makes sense from Finaccess' point of view as its interests include AmRest Holdings, which operates KFC, Pizza Hut, Burger King and Starbucks outlets across Europe and China.
But Singh said it was unclear how it would work if Finaccess only took a 75 per cent stake as it would leave the other 25 per cent of shareholders in a bit of "no man's land".
While the stock would remain listed, the majority owner would have the ability to drive the strategy and decide not to pay a dividend or raise money from shareholders.
He said how the 75 per cent offer would work would need to be explained in the next few weeks when an official offer is likely to be made.
The deal would also require approval from the Overseas Investment Office and Yum! Brands — which owns the KFC, Pizza Hut and Taco Bell brands.
Singh said he didn't expect there to be any problems with gaining those approvals. "The only anomaly is that 75 per cent."
Shares in Restaurant Brands closed up 14.08 per cent yesterday on $8.67.
A failed takeover for Steel & Tube, a partial offer for Restaurant Brands, and speculation of a bid for Sky Television Network makes it seem like there is a lot activity going on at the moment.
Mark Lister, head of private wealth research at Craigs Investment Partners, says takeovers are not usual and while it might feel like there is a flurry at the moment it is quite typical in the late stages of an economic cycle.
Businesses are cashed up and with share prices having risen they can use their strong balance sheets to fund acquisitions.
At the same time, growth is slowing and going to be harder to come by and if further growth isn't going to come through business as usual activity then a takeover could be the answer.
Lister says it can be bittersweet, pointing to the Restaurant Brands offer which could make shareholders a lot of money if it goes through but would also be a loss to the stock exchange if it results in a delisting of what has been seen as a good quality company.
He points to the missing link that has been a lack of new companies coming to market.
Talk of listings from Vodafone, UDC and others have not eventuated so far this year and look very unlikely this close to Christmas.
"That is where it is a little bit of a problem."
More to come
Shane Solly, portfolio manager at Harbour Asset Management, believes there is more takeover activity to come with the New Zealand dollar having fallen of late, making Kiwi businesses more attractive to overseas buyers.
Solly said there was a possible five or six other companies on his list of potential targets and while he wouldn't name them, he described them as stable, solid businesses that would bolt on well to global businesses.
The downside is that with a lack of new listings coming to market, any further takeovers could also result in the New Zealand market shrinking.
But Solly said he expected some existing listed companies could look to raise capital in the coming months.