A leading international investment firm headquartered in Bahrain, has announced the signing of a definitive agreement for the sale of Church's Chicken to an affiliate of Friedman Fleischer & Lowe, a leading San Francisco-based private equity firm. Terms of the transaction were not disclosed and the transaction is expected to close within 30 days, subject to normal closing conditions. Arcapita's affiliates acquired Church's Chicken in December 2004. In spite of the difficult market and hostile economic conditions of the last 18 months, the completion of this exit will generate an attractive return for Arcapita's investors of close to two times their original investment.
Church's Chicken is one of the world's largest quick-service chicken restaurant concepts, with over 1,600 outlets worldwide. Under Arcapita's ownership, the company has increased margins, expanded the store base, and added new markets in the U.S., Latin America, the Arabian Gulf, the U.K., Russia and India. It has also recorded earnings growth of almost 60% and now generates over $1.2 billion of global system sales annually. Atif A. Abdulmalik, CEO of Arcapita, commented: "Given the very constrained credit environment, as well as the sustained economic downturn, this announcement is a significant achievement for Arcapita and our investors. It reflects the tremendous quality of the company we have built with management over the last four and a half years, and importantly, it will yield approximately a two times cash-on-cash return for our investors." The U.S. LBO market has suffered a dramatic slowdown as a result of the challenging conditions, and this is one of the very few significant transactions with leverage since August 2008. Stockton Croft, Head of Arcapita's U.S. Corporate Investment group, commented: "At the time of acquisition, we brought in a new, highly experienced management team led by CEO and President, Harsha V. Agadi. This team has successfully increased same store sales every year, improved the quality and number of stores in the U.S., and accelerated international expansion. Maintaining earnings growth through the last 12 months is clear testimony to the robust nature of the company's business." David L. Lowe, Vice Chairman of FFL, said: "FFL has a long history of successful consumer industry investments and the acquisition of Church's Chicken represents an opportunity to apply our sector expertise to enhance value of an outstanding quick service restaurant chain. We look forward to working with Harsha V. Agadi and the Company's extraordinarily talented team." Arcapita was advised by Banc of America Merrill Lynch Securities.
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