In a sudden turn of events, Vikram Bakshi, the ousted managing director of Connaught Plaza Restaurants (CPRL), on Thursday offered to buy out McDonald’s India’s (MIPL) 50% stake in the joint venture.
Bakshi’s counsel made an offer before the Company Law Board (CLB) seeking to buy out MIPL’s stake in CPRL at a valuation based on the “net asset value” of the company, exluding the value of the “McDonald’s” brand. Responding to the proposal, MIPL immediately made a counter-offer to buy out the ex-MD’s stake at the valuation offered in 2008.
According to the petition filed by Bakshi before the CLB, McDonald’s Corp senior official Peter Rodwell had in August 2008 offered to buy out his stake for $5 million. Subsequently, in November 2008, the offer was upped to $7 million. CLB has directed the lawyers of both sides to seek clear instructions from their clients on whether they want to proceed with a stake sale. Their stands are to be made known on March 11.
While CPRL’s net revenues in FY12 were Rs 490.37 crore, up 27.3% over the previous year, profits after tax fell to Rs 6.4 crore, down 68% over the Rs 20.4 crore reported in FY11. Westlife — which operates in the western and southern parts of the country, saw revenues rise 25% in FY13 to R674.8 crore. Westlife’s profits were lower at Rs 33.2 crore from Rs 42.2 crore in FY12.
CPRL runs 154 outlets in northern and eastern India, while Westlife, owned by the Jatia family, runs 166 restaurants. Westlife has a current market capitalisation of Rs 5,879 crore. CPRL’s current assets at the end of FY12 were Rs 33.22 crore while the current liabilities were Rs 179.15 crore.
The partnership between the US fast-food chain and Bakshi is housed in CPRL, a 50:50 joint venture that was formed in 1995. Bakshi’s term as CPRL’s managing director expired on July 17, 2013. On August 30, McDonald’s had issued notices in select newspapers saying Bakshi had ceased to be the MD. In early September, Bakshi moved the CLB for his reinstatement.
Bakshi had called on McDonald’s to conduct an independent valuation by a third party and had subsequently enrolled audit firm Grant Thornton to carry out of a valuation of the business. Grant Thornton, in its report, went on to value the joint venture company at $331.3 million. CPRL had tangible assets of Rs 102.7 crore as