Friday 29 Mar 2024
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KUALA LUMPUR: In-flight catering company Brahim’s Holdings Bhd (fundamental: 0.8; valuation: 1.8) is scouring for more food and beverage (F&B) acquisition targets after its shareholders rejected yesterday its RM95 million takeover bid for the loss-making Burger King franchise from Ekuiti Nasional Bhd (Ekuinas).

“We are still looking at opportunities in F&B to address and reduce our dependency on airline catering. We are talking to some companies,” Brahim’s executive chairman Datuk Seri Ibrahim Ahmad Badawi told reporters after chairing the extraordinary general meeting (EGM) yesterday.

However, Ibrahim, who is the brother of former prime minister Tun Abdullah Ahmad Badawi and owns an indirect 42.32% stake in Brahim’s, declined to elaborate on the companies. 

Brahim’s proposed takeover of the Burger King franchise was aborted after its shareholders overwhelmingly rejected the bid during the EGM with 90% voting against it.

To recap, Brahim’s, via its subsidiary Brahim’s Trading Sdn Bhd, together with private equity fund Quantum Angel — led by Datuk Ahmad Zaki — proposed in November last year to buy out the Malaysian and Singaporean franchise of Burger King for RM95 million cash from Rancak Selera Sdn Bhd, a unit of Ekuinas.

For the nine-month financial period ended Sept 30, 2014, Rancak Selera dipped into a loss of RM50.4 million compared with an income of RM29.8 million in the previous corresponding period. The loss was mainly due to the unrealised loss of fair value recognised in investment in Cosmo Restaurants Sdn Bhd and Burger King Singapore Pte Ltd.

It was previously reported that a special purpose vehicle (SPV) — to be led by Ahmad Zaki — would be set up post-acquisition of Rancak Selera, whereby Brahim’s will hold 80% in the SPV and Quantum Angel will take the remaining 20%.

Brahim’s had earlier, in a circular to shareholders, said the deal would enable it to compete more effectively with prominent fast-food chains like McDonalds and KFC (KFC Holdings Bhd), but that it will first need to revive the Burger King franchise in Malaysia and Singapore after the proposed acquisition.

During the EGM, shareholders were briefed that although the franchise was loss-making, the deal would provide long-term returns to the group as Brahim’s was confident of turning it around. 

Ibrahim later told reporters that the rejection did not come as a surprise as the group had been getting negative feedback from many shareholders after it announced the proposal. 

“But now circumstances are different, but I cannot reveal [much], as there are some new developments. At the time [when we wanted to take over Burger King], we were quite confident as we have done turnarounds before, like with MAS’ (Malaysian Airline System Bhd) catering business,” he noted. 

Ibrahim was referring to how the company acquired a 70% stake in loss-making MAS Catering Sdn Bhd from MAS back in 2003, which it renamed Brahim’s Airline Catering Sdn Bhd and turned around. Brahim’s Airline now holds a lucrative 25-year concession to supply in-flight meals to MAS.

On this MAS catering contract, which Brahim’s is currently renegotiating with Khazanah Nasional Bhd as part of the airline’s restructuring efforts, Ibrahim only said “we will have to work at it” when pressed, and that Brahim’s prospects this year look challenging.

The national carrier currently accounts for nearly 90% of Brahim’s revenue, which may be why Brahim’s is set on acquiring new businesses to diversify its income streams.

 

This article first appeared in The Edge Financial Daily, on February 26, 2015.

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