Private equity-backed fast food business Craveable Brands is taking two potential suitors through due diligence and has its bankers on hand to navigate a deal.
Street Talk can reveal Asian private equity firm PAG Asia Capital and one other interested party separately approached Craveable Brands about a potential transaction in the past two months, sparking moves by the company’s owners to consider their options.
It is understood PAG and the other party have been granted due diligence, including access to a data room with confidential sales and other financial information, to see whether either can firm up its indicative interest.
Meanwhile Craveable Brands’ owners, spearheaded by private equity firm Archer Capital and Partners Group, have hired investment bank Morgan Stanley to oversee negotiations.
Sources cautioned there was no sale process under way – just the data room with the two tyrekickers. However, Craveable would be expected to consider running a formal auction should interest broaden out.
Craveable Brands is an Australian and New Zealand quick service restaurant franchisor, with a portfolio of three brands focused on chicken and burgers; Red Rooster, Oporto and Chicken Treat.
It is understood the company makes about $60 million in annual earnings before interest, tax, depreciation and amortisation. The business is likely to be pitched around growth in its Oporto brand, which is said to be recording mid single digit growth in like-for-like sales and rolling out about 20 new stores a year.
The buyer interest comes more than 18-months after Craveable Brands’ owners scrapped plans to float the company on the Australian Securities Exchange, blaming market conditions at the time.
Its shareholders are keen to pursue a trade or private equity sale rather than make another attempt at an initial public offering, sources said.
Back in mid-2017, Craveable Brands was pitched as the country’s fifth largest QSR franchisor with 561 restaurants and another eight in New Zealand, according to research from then sponsor broker Goldman Sachs. Goldman Sachs’ equities analysts valued it at $448 million to $534 million, or 14.8-times to 17.7-times forecast profit. [Morgan Stanley, now the company’s defence adviser, was also a sponsor broker].
Craveable Brands’ owners are expected to seek about 10-times EBITDA for the business, which would value it at about $600 million.