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Blog
Church's Chicken Deal is a Strong One
June 17, 2009
The recent acquisition of Church's Chicken by Friedman Fleischer and Lowe isn't likely to make a wing's worth of difference to the fast-feeder's many customers. They'll still have access to the tasty fried bird and re-hydrated mash potatoes the 1,400 unit chain serves up--largely in urban areas--thousands of times a day.
Yet it's likely to win cheers from the financial community, which has been starved for the type of M&A activity witnessed in the late '90s through '07. Of course, those were highly leveraged deals that didn't always deliver to investors.
Fists are up after Church's Chicken sold.
This one apparently did, though no one really knows for certain. Arcapita and FF&L decided not to disclose the transaction's details. So I asked an Arcapita spokesman at Bahrain headquarters to share what he could about the sale. To wit:
The sale by all accounts was quite an accomplishment, with some observers speculating FF&L paid as much as $550 million. Others simply praised the fast feeder, headquartered in Atlanta, for its ability to thrive in a tough economy. "To get a deal done in this climate says a lot about the strength of management and the PE firm," offered Atlanta-based financial strategist Jordon Krolick, who once oversaw M&A for McDonald's.
► The purchase price as reported by Reuters ("more than $300 million") was "considerably incorrect."
► Investors made two times their money.
► Arcapita paid $390 million in '04 for Church's, trimming the sum to about $289 million through sales/leaseback deals.
► Church's management remains in place.
He compared it to the deals of the recent past. "Many of those deals were bought on expectation," he said. "This one created real value given the equity that must have been involved."
Posted by David Farkas on June 17, 2009 | Comments (4)
Reader Comments
at 6/17/2009 5:31:05 PM, Earl Flynn commented:
Well, let's see. They have a fried chicken company with a product that many consider greasy and under-cooked located in mostly urban areas where unemployment has devastated the people living there. Except for the Rio Grande Valley and certain other Hispanic/minority areas this brand has not been able to cross-over to a broader customer base. The real-estate has been sold, the buildings are very old and I doubt if the very small building size will allow for any menu expansion. Yes, there is more room to grow domestically but just how much is questionable. For those who think the company will now be able to offer a pork-based product may be disappointed by the customer's acceptance of such an offering.
at 6/17/2009 5:54:14 PM, Dave commented:
Most excellent points, Earl. The chain -- or rather, its Muslim owners -- did have an issue with pork. But I don't think consumer acceptance of a pork product, if indeed it's ever offered, will be a problem. Good marketing and a tasty offering should do the trick. I don't belive FF&L haas bought a pig (ouch) in a poke, necessarily.
at 6/18/2009 11:01:28 AM, Jonn Straw commented:
And who said they has tasty chicken ? Popeye's has there chicken beat w/ their eyes closed. They buy the cheapest chicken they can find and does taste like cardboard. But it is cheap !!! You get what you pay for. Except KFC is way over priced .
at 7/6/2009 12:24:01 PM, flashplayer commented:
Perfect!