Pacific Equity Partners’ fast food group Collins Foods plans to raise up to $238 million in an initial public offering in an environment where experts have identified food retail as a major growth area.
PEP is a leading Australasian private equity firm focused on buyouts and late stage expansion capital in Australia and New Zealand.
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In addition to Collins Foods PEP’s portfolio includes Hoyts Group, Veda Advantage, Godfreys and Griffin’s Foods.
A successful float will see PEP end more than five years of ownership of Collins Foods, which operates 119 KFC outlets in Queensland and 26 Sizzler restaurants nationally.
According to the company’s website PEP owns 52% of Collins Foods with management and employees owning the remaining 48%.
Collins Foods will offer 81.6 million shares priced from $2.50 to $2.92, with shares expected to begin trading on August 10 and Collins Foods’ management retaining a 10% stake.
Most of the funds raised will be reinvested in the business, particularly the refurbishment of the company’s KFC stores.
Collin Foods’ decision to pursue an IPO was prompted by last month’s successful sale of a larger rival fast food chain.
Quadrant Private Equity’s Quick Service Restaurants – which operates the Red Rooster, Oporto and Chicken Treat chains – was sold to Archer Capital for $450 million.
Quadrant, which made a threefold return for investors on the deal, said the certainty of a sale was more attractive than a float because of market volatility and consumer caution.
Food retail has been nominated by franchise experts as a key growth area for businesses, suggesting that there is an opportunity for start-ups to buy into the sector or to expand existing operations.
Lorelle Frazer, director of the Asia-Pacific Centre for Franchising Excellence at Griffith University, says food will continue its impressive performance as consumers continue to dine out at less expensive venues.
Simon McNamara – a founding shareholder in burger chain Grill’d and co-founder of franchise investment fund Inkuberra – identified casual dining as the strongest area of food retail in the current economic climate.
“That segment has been doing very well because people post-GFC are more dollar conscious and more value driven,” he says.
According to franchise expert Jason Gehrke, any business involved in asset management and enhancement, such as auto accessories and home improvements, is also benefitting from cost-conscious consumers.
“Consumers are beginning to reconsider buying or upgrading their cars or homes as a result of financing or affordability issues, and are deciding instead to renovate or improve what they already have,” he says.