KFC, Pizza Hut and Taco Bell items will soon be made by the same company in India following a merger deal between Sapphire Foods and Devyani International. The company boards approved a share-swap deal on Thursday — with DIL issuing 177 equity shares for every 100 from SFIL. The agreement also comes at a time when fast-food franchisees in India face a steady slowdown in same-store sales and margin pressures. Consumers have gradually cut back on dining out and ordering in amid high living costs.
“The process of obtaining these approvals is expected to take approximately 12 to 15 months, following which the merger will become effective. Upon completion, the transaction will result in DIL becoming one of the largest quick-service restaurant operators in India by combining the operations of both companies, positioning the merged entity for the next phase of accelerated growth, scale, and profitability,” read an excerpt from the regulatory filing.
How does the deal work?
The transaction will see Sapphire Foods India Limited merging into Devyani International Limited through a share-swap mechanism. According to details shared by the two companies, DIL will issue 177 equity shares “for every 100 equity shares of SFIL”. Devyani group company Arctic International will also acquire approximately 18.5% of SFIL’s paid-up equity share capital from the existing SFIL promoters — with an option to assign to a mutually agreed financial investor.
The proposed merger is subject to receipt of all customary regulatory and statutory approvals, including nods from the stock exchanges, the Competition Commission of India, the National Company Law Tribunal(s), and the shareholders and creditors of both companies.
According to the official update, DIL “is expecting an overall synergy of Rs 210 to 225 crores on an annual basis from the second full year operations of the integrated company”.
Acquisition of KFC Stores
A regulatory filing shared by the two companies also indicated that DIL would acquire 19 KFC restaurants currently operated by Yum! India in Hyderabad. The company will also pay a one-time charge “towards merger approval and the license fee for the additional territory”.