Finaccess Capital's $881.5 million offer for three-quarters of Restaurant Brands New Zealand is a compelling price, says First NZ Capital.
The research house raised its rating on Restaurant Brands to 'neutral' from 'underperform', and boosted its target price to $8.85 from $6.88 on the view that if the offer's formalised it will get full buy-in from investors. The $9.45 indicative offer was a 24 per cent premium to where the shares traded before the deal was announced.
The shares jumped 14 per cent yesterday on 10 times the normal volume, but have given up some of that gain today. They closed at $8.50.
Analyst Andrew Steele said the indicative offer is compelling and more than a third above his discounted cash-flow valuation. However, he said it was worth noting that if a formal offer is lodged and wins the various approvals, it will make Restaurant Brands a different investment proposition with thinner liquidity and a likely exit from some indices.
"While RBD's management has indicated that they expect Finaccess to be hands-off shareholders, it is important to note that no details have been provided by Finaccess regarding its strategic ambitions for RBD and whether it intends to let the existing management pursue the company's growth strategy in its current form," Steele said in a note to clients.
Finaccess Capital's plan to leave a quarter of the company publicly-owned baffled some investors. Steele said the motivation was unclear and speculated it might want access to public markets for future large transactions.
Finaccess Capital's interests include AmRest Holdings, which operates KFC, Pizza Hut, Burger King and Starbucks outlets across Europe and China. Restaurant Brands holds the franchise for KFC, Pizza Hut, and Carl's Jr in New Zealand, and operates KFC franchises in Australia. It also runs Taco Bell and Pizza Hut stores in Hawaii and wants to expand to the US mainland.
Restaurant Brands' board recommends shareholders wait for a formal offer to be lodged and a target company statement produced.