Pacific Equity Partners tipped to float Collins Foods

The fast food deals continue for private equity, with Pacific Equity Partners reportedly set to float Collins Foods Group, the group behind KFC and Sizzler restaurants, before the end of the year.

According to the Australian Financial Review, Deutsche and UBS will soon finish pre-marketing research and look to speak to institutions.

The listed Domino’s Pizza Enterprises, which currently trades on a price to earnings ratio of about 18 times, is likely to be seen by investors as the best comparison for Collins Foods. 

Among the selling points in the float will be KFC’s position as Australia’s most popular chicken fast food chain and management’s long track record.

PEP are said to be looking for an enterprise value of $400 million.

The news follows the sale of Quick Service Restaurant by Quadrant Private Equity to Archer Capital this month for about $450 million.

QSR is the largest Australian-owned fast-food operator, and includes the Red Rooster and Oporto chains.

QSR had also been examining a float, but Quadrant said last week that choppy equity markets meant a sale was a better option.

News of the Collins float also comes amid reports this week that accounting software giant MYOB may be returned to the bourse by its private equity owners, and smallgoods manufacturer Primo has attracted interest from private equity groups Affinity Equity and Blackstone.

The prospect of a Collins and MYOB listing would likely please market-watchers, who have interpreted the dearth of IPOs this year as a sign of poor confidence in the market.

Private equity has attributed their preference for trade sales over floats recently to market volatility and consumer caution, although others say the industry’s reputation took a hit among investors after its high-profile floats Myer and Kathmandu failed to set the world on fire, and the collapse of the private equity-owned Colorado and REDgroup Retail.

Food has been nominated by franchise experts as a potential growth area for businesses, with Lorelle Frazer, director of the Asia-Pacific Centre for Franchising Excellence at Griffith University, previously saying it will continue its impressive performance as consumers allow themselves the occasional treat.

After the QSR acquisition, Archer Capital partner Peter Gold told SmartCompany that while the group is continuing to look across all sectors for further purchases, a major acquisition is unlikely any time soon.

Archer has already snapped up a 60% stake in the V8 Supercars motor sport business, and the Healthe Care hospital group offloaded by CHAMP Ventures recently.

Pacific Equity Partners was not available for comment prior to publication.