Fast-food chains
put up for saleTheo H. Davies is seeking
a buyer for its Pizza Hut, Taco
Bell and other restaurants
The food service division of Theo H. Davies Co. Ltd. is being shopped to potential buyers.
Hawaii's Pizza Hut, Taco Bell, Long John Silver's and A&W All American Food restaurants are involved and the package could sell for between $45 million and $50 million, according to a source familiar with the pending deal.
There are 51 Pizza Huts, 34 Taco Bells and one combination Long John Silver's-A&W restaurant in Hawaii.
Theo H. Davies -- owned by 171-year-old, Hong Kong-based Jardine Matheson Ltd. -- bought the rights to the Long John Silver's and A&W franchises from Singapore-based Yum! Brands Inc. International in April.
International investment bank Houlihan Lokey Howard & Zukin was contracted to research the quick-service restaurant market in Hawaii and prepare a prospectus. Sixteen potential buyers received the information and signed confidentiality agreements, according to a source familiar with the deal.
"The research is confidential information," and there will be no comment from the bank, said Marie Ali, of Houlihan Lokey's media relations office.
Theo H. Davies President Henry Katsuda is among those keeping mum.
"We continually look at interest in our business, but it is Jardine's policy not to comment on the process," he said.
A Jardine Matheson spokeswoman in Hong Kong also declined to comment.
"I think TheoDavies is always looking for opportunities," said Bruce Stebbins, Hawaii general manager for Yum! Brands International.
Stebbins said he would be involved in any negotiations to determine the appropriateness of a prospective operator of its brands in Hawaii, but he insisted that "nothing's going on."
E-mails seeking comment from Yum! Brands International in Singapore went unanswered.
Talks have been under way for months, however, according to a source familiar with the process.
At the time of the Long John Silver's-A&W purchase in April, Theo H. Davies planned to open Hawaii's second Long-John Silver's-A&W combination restaurant by year's end, and to expand the brands with free-standing and mall locations. The deal included an existing restaurant at Moanalua Shopping Center, near the corporate offices of both Theo H. Davies and Kazi Foods Inc., franchisee of Hawaii's KFC and Burger King restaurants.
Kazi has 28 KFC and 23 Burger King restaurants in Hawaii. On a national basis, it is the second-largest KFC franchisee. In 2002 it reported annual sales exceeding $150 million.
"Right now we're where we want to be in Hawaii," said General Manager Steve Johnson. "We just acquired Burger King a little over a year ago and things are going well."
He said Kazi is not among the potential buyers.
"I would be the first to know and we have no plans," he said. "We know nothing about anything being for sale in Hawaii."
Officials at Zippy's, which sells its chili and rice at selected Taco Bell locations, were not aware of any pending deal, according to Jeanine Mamiya-Kalahiki, marketing manager.
Houlihan Lokey's research of the quick-service restaurant market showed McDonald's owning 33 percent, Jack in the Box with 24 percent, Zippy's with 18 percent, Taco Bell with 13 percent, Burger King with 8 percent and KFC with 4 percent.
The estimated purchase price of $45 million to $50 million reflects five times the operational cash flow of the restaurants for sale, as outlined in the prospectus.
Sale proceeds would be split between Yum! and Jardine.
Other Theo H. Davies businesses in Hawaii, owned by Jardine since 1973, include:
>> Pacific Machinery, an industrial equipment distributor.Theo H. Davies Co. Ltd. had gross annual sales $172 million last year, according to Hawaii Business magazine's 2003 Top 250 list. That figure does not include revenue from TheoDavies Euromotors, which is listed separately.>> TheoDavies Euromotors and other dealerships selling automobiles manufactured by Mercedes-Benz, Jaguar, Land Rover and Porsche.
>> Sig's Auto Body & Paint Inc.
>> A 40 percent stake in the Kahala Mandarin Oriental hotel.
