Vikram Bakshi offers to sell 50% equity in McDonald's JV for Rs 2500 crore

NEW DELHI: McDonald’s estranged joint venture partner Vikram Bakshi has offered to sell his 50% equity in the joint venture firm Connaught Plaza Restaurants, back to the US burger and fries chain for Rs 2,500 crore and put an end to their legal tussle, two people aware of the developments said.

“The valuation of Rs 2,500 crore is market-related. Bakshi wants to use the stock market value of Westlife Development, which runs McDonald’s outlets in the west and south through its subsidiary Hardcastle Restaurants, as a benchmark if he were to finally exit the joint venture,” one of them said. “The valuation of Westlife is around Rs 5,000 crore, so 50% of CPRL (Connaught Plaza Restaurants) would be Rs 2,500 crore, given that the businesses are largely the same.”

This person said that even if McDonald doesn’t agree to pay Rs 2,500 crore, discussions may lead to an amount that could be 20% lower. CPRL operates McDonald’s outlets in north and east India.

The other official said Bakshi has informally communicated the valuation to McDonald's.

The offer to exit was also communicated during the ongoing Company Law Board proceedings between the two, where Bakshi alleged that the US major did not treat him equally while giving preferential treatment to its other partner in India Westlife.

The court has given McDonald's time till October 27 to revert on Bakshi’s offer.
Bakshi has also offered to buy McDonald’s stake in the venture at the net asset value given that he would not hold on to the brand once the multinational exits the venture. That amounts to around Rs 150 crore for McDonald’s stake, which he has arrived at as largely cost of assets which means equipment, one of the persons quoted earlier said.

If he buys out McDonald’s, then he can either partner with some other fast-food brand to use the properties and expertise of the existing chain, or merge it with one of his hospitality projects.

The 50:50 joint venture between McDonald's Corporation and Bakshi was set up back in 1995. But in a public notice issued in August last year, McDonald’s stated that Bakshi had ceased to be managing director of the firm, with his term expiring on July 17.

In November last year, McDonald’s terminated its JV agreement with Bakshi and at the same time, moved the London Court of International Arbitration to settle the legal spat.