Arcapita Bank, an investment firm headquartered in Bahrain, yesterday said it had signed an agreement with an affiliate of US-based private equity firm, Friedman Fleischer & Lowe, to sell its stake in Church's Chicken for an undisclosed amount.
In spite of the difficult market conditions of the past 18 months, the completion of this exit will generate an attractive return for Arcapita's investors of close to two times their original investment.
Arcapita bought Church's Chicken in 2004 for $390 million (Dh1.4 billion) from AFC Enterprises, the parent company of Popeye's Chicken. The company has more than $1bn in revenue and more than 1,500 locations, 400 of them overseas, according to Thomson Reuters' peHUB.
Other terms of the transaction were not disclosed and the transaction is expected to close within 30 days, subject to normal closing conditions. Arcapita was advised by Banc of America Merrill Lynch Securities.
Church's Chicken is one of the world's largest quick-service chicken restaurant concepts, with more than 1,600 outlets worldwide.
Under Arcapita's ownership, the company has increased margins, expanded the store base, and added new markets in the US, Latin America, the GCC, the UK, Russia and India. It has also recorded earnings growth of almost 60 per cent and now generates more than $1.2bn of global system sales annually.
Atif A Abdulmalik, CEO of Arcapita, said: "Given the very constrained credit environment, as well as the sustained economic downturn, this announcement is a significant achievement for Arcapita and our investors. It reflects the quality of the company we have built with management over the past four-and-a-half years, and importantly, it will yield approximately a two times cash-on-cash return for our investors."
Stockton Croft, Head of Arcapita's US Corporate Investment group, said: "At the time of acquisition, we brought in a new, highly experienced management team led by CEO and President, Harsha V Agadi. This team has successfully increased same store sales every year, improved the quality and number of stores in the US, and accelerated expansion. Maintaining earnings growth through the past 12 months is clear testimony to the robust nature of the company's business."
David L Lowe, Vice-Chairman of FFL, said: "FFL has a long history of successful consumer industry investments and the acquisition of Church's Chicken represents an opportunity to apply our sector expertise to enhance value of a quick-service restaurant chain."
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