American fast-food chain McDonald's has offered Rs 48-50 crore (Rs 480-500 million) for its estranged India partner Vikram Bakshi's 50 per cent stake in Connaught Plaza Restaurants, the joint venture that runs the chain in North and East India, say sources in the know.
Rejecting the buyout offer, made by McDonald's on the basis of a formula in its submission to the Company Law Board, Bakshi on Monday sought the appointment of an independent valuer to determine the right valuation.
According to estimates by Bakshi, who had earlier offered to buy out McDonald's in the joint venture at "net asset value", his 50 per cent stake should be valued at Rs 2,500 crore (Rs 25 billion).
His calculation is based on the market value of Westlife Development, whose subsidiary Hardcastle Restaurants runs McDonald's outlets in West and South India.
Bakshi on Monday informed CLB that the McDonald's offer was ridiculous and contrary to the Foreign Exchange Management Act, as it only provided for return on equity.
According to a source, Bakshi's legal counsel also noted that the valuation did not capture his hard work of 18 years in building McDonald's a leading brand in India which was going to have a huge potential in the future.
The counsel requested CLB to allow appointment of an independent valuer, in line with the Fema regulations.
To a Business Standard query, a spokesperson for McDonald's said in an emailed reply from the company's US headquarters: "As this is an internal and legal matter, it is inappropriate for us to comment."
Earlier, Bakshi had also offered to buy the McDonald's stake in Connaught Plaza at net asset value, which was around Rs 150 crore at that time.
He had said he was not keen on retaining the brand and would prefer to start his own food & beverage venture.
In an interview earlier, he had indicated he might either create a new brand or tie up with other global brands looking to enter India.
According to their joint-venture agreement, both McDonald's and Bakshi have the right to offer to sell or buy the other's entire stake. But for such a deal to go through, the other side must accept the offer.
In 2008, McDonald's had proposed Bakshi sell his stake for $5 million and later raised the offer to $7 million.
But Bakshi did not agree to sell out at such a low valuation. In its independent assessment, Grant Thornton had valued the business at $331 million.
Bakshi had approached CLB after McDonald's said in a public notice dated August 30 last year: "Vikram Bakshi has ceased to be the managing director of Connaught Plaza Restaurants, pursuant to the expiration of Bakshi's term on July 17."
Later in August, Bakshi had asked McDonald's to return all the prime properties it had leased from Bakshi for running its outlets.
|1996: McDonald's enters India with two JV partners - Vikram Bakshi's Connaught Plaza and BL Jatia Group's Hardcastle Restaurants
2010: Jatias take full control of their venture; Bakshi stays in JV arrangement with McDonald's India
2013: McDonald's India says Bakshi, whose term as MD ended on July 17, was removed from the position; Bakshi says he still has 50% equity in the JV and moves to CLB
Dec 2013: Bakshi seeks arbitration, McDonald's defends arbitration move
Image: Vikram Bakshi