Arisaig Partners to pick up 3.5% of McDonald’s franchisee Westlife for $30M

Emerging markets-focused investment firm Arisaig Partners, which chases investments in public-listed consumer-facing companies, is acquiring 3.47 per cent of Westlife Development Ltd, one of the two master franchisees of McDonald’s in India, for Rs 180 crore ($30 million). The investor is picking up the shares through a preferential allotment.

Arisaig will subscribe to fresh shares at Rs 333.05 a piece, valuing the company at Rs 5,000 crore (pre-money) and at Rs 5,180 crore (post-money). Westlife Development scrip, which has shot up 40 times in the past one year, last traded at Rs 328.45 a share, up 2 per cent and hitting the upper circuit on the BSE on Tuesday in a strong Mumbai market.

It also disclosed that it had received court approval for a consolidation of its subsidiaries announced last year (see here). As a result of the consolidation, Hardcastle Restaurants Pvt Ltd (HRPL), master franchisee for west & south India operations of McDonald’s Restaurants, is now a direct subsidiary of Westlife Development.

The Scheme of Arrangement involves the consolidation of BL Jatia group companies, HRPL (through its majority shareholder Triple A Foods) and Westpoint Leisureparks Pvt Ltd (majority shareholder of Triple A Foods) under Westlife Development Ltd. The BL Jatia family holds majority ownership in these companies.

Commenting on the merger, Amit Jatia, vice-chairman of Westlife Development Ltd, said, “The consolidation of our companies under Westlife Development opens up options for us to accelerate our growth plans for expanding McDonald’s restaurants in west and south India. The consolidation will also open up opportunities for the India market to invest in the growth of the McDonald’s franchisee, HRPL, through Westlife Development.”

The Jatias will own 64.07 per cent after the preferential allotment and the group restructuring. Arisaig will own 3.47 per cent stake.

The funding from Arisaig is routed through Arisaig India Fund Ltd, which is part of Arisaig Asia Consumer Fund Ltd. Arisaig India Fund is a registered Singapore-headquartered FII and part of Arisaig Partners. Arisaig Partners is a fund management company with $5 billion in assets across emerging markets. Established in 1996, the fund has been investing in India for over a decade and is a shareholder in a number of large consumer businesses.

Its Indian portfolio includes names such as Trent, United Breweries, Future Retail, Marico, Jubilant Foodworks (which runs Domino’s Pizza chain in India), Colgate Palmolive, Nestle India, Future Ventures, Godrej Consumer, Britannia, GlaxoSmithKline Consumer and Shoppers Stop.

The preferential allotment to Arisaig will have a lock-in period of one year from the date of allotment.

“The funds raised through the preferential allotment will be used to invest in the growth of our business, aggressively increase our retail footprint, fortify our presence in the existing markets and enable us to enter newer markets,” said Jatia.

Westlife reported consolidated revenues of Rs 684.3 crore in FY13, riding a strong revenue growth of 25 per cent of its subsidiary, Hardcastle Restaurants Pvt Ltd.

(Edited by Sanghamitra Mandal)

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