Pres­tige Hold­ings Lim­it­ed, the lo­cal fran­chise hold­er of KFC, Piz­za Hut and TGI Fri­day, yes­ter­day an­nounced that it had agreed to pur­chase 100 per cent of the Sub­way Restau­rant busi­ness and re­lat­ed as­sets from Main Stream Foods Lim­it­ed for the sum of $110 mil­lion. Pres­tige Hold­ings, which is a pub­licly list­ed com­pa­ny, said that it will fi­nance the ac­qui­si­tion by ac­cess­ing an un­se­cured loan of $65 mil­lion at 7.5 per cent from Vic­tor E Mout­tet Ltd, its par­ent com­pa­ny, and that it would re­ceive an in­ter­est-free loan of $45 mil­lion from the sell­er of the Sub­way Restau­rant busi­ness, Main Stream Foods Lim­it­ed, to be re­paid 18 months from close of the trans­ac­tion.

This means that 41 per cent of the pur­chase price will come by way of the in­ter­est-free loan from Main Stream Foods Lim­it­ed, which was es­tab­lished in Oc­to­ber 1997 and cur­rent­ly owns and op­er­ates 40 Sub­way restau­rants through­out Trinidad & To­ba­go. In a news re­lease that was sub­mit­ted to the T&T Stock Ex­change, Pres­tige Hold­ings said: "The pur­chase con­sid­er­a­tion of $110 mil­lion will be fi­nanced by an un­se­cured loan of $65 mil­lion bear­ing a fixed in­ter­est rate of 7.5 per cent on the prin­ci­pal bal­ance," from Vic­tor E Mout­tet Lim­it­ed, the par­ent com­pa­ny of Pres­tige Hold­ings. Pres­tige will re­pay $5 mil­lion of the $65 mil­lion debt in each of the suc­ceed­ing three years, ac­cord­ing to the state­ment.

Vic­tor E Mout­tet's $65 mil­lion loan "is con­vert­ible to com­mon shares at PHL's op­tion, through a Right's Is­sue of up to $50 mil­lion. As soon as it is prac­ti­ca­ble, PHL will re­view the Group's com­bined cap­i­tal struc­ture, to de­ter­mine the op­ti­mal debt to eq­ui­ty ra­tio, and take ap­pro­pri­ate ac­tion on its cap­i­tal­i­sa­tion." Pres­tige Hold­ings said that the ac­qui­si­tion is es­ti­mat­ed to pro­vide an in­crease in earn­ings per share on a stand­alone ba­sis, and im­prov­ing as the restau­rant hold­ing com­pa­ny "im­ple­ments syn­er­gies and takes ad­van­tage of the Sub­way Brand's con­tin­ued growth and de­vel­op­ment in Trinidad & To­ba­go." It is es­ti­mat­ed that the trans­ac­tion would add ap­prox­i­mate­ly $170 mil­lion to the sales of Pres­tige Hold­ings, in the com­pa­ny's fi­nan­cial year 2012 while adding $12.7 mil­lion to its net af­ter tax prof­it, be­fore fac­tor­ing in in­ter­est cost on the ac­qui­si­tion fi­nanc­ing.

"These es­ti­mates do not in­clude new store growth and syn­er­gies from PHL's ex­ist­ing op­er­a­tions of six­ty-five (65) KFC, Piz­za Hut and TGI Fri­day's restau­rants in Trinidad & To­ba­go," ac­cord­ing to the restau­rant hold­ing com­pa­ny. Mean­while, Pres­tige Hold­ings chair­man Joseph Esau is­sued an­oth­er state­ment in which he said that the com­pa­ny was in dis­cus­sions with three pos­si­ble pur­chasers of its 50 per cent stake in a HFC joint ven­ture in the Do­mini­can Re­pub­lic. "The car­ry­ing val­ue of this in­vest­ment is $29.5 mil­lion, and we ex­pect a sig­nif­i­cant im­pair­ment of our in­vest­ment; as a re­sult the Board agreed that an ap­pro­pri­ate pro­vi­sion will be made in PHL's fi­nan­cial state­ments for the year end­ing 30 No­vem­ber 2011" said Esau of the Do­mini­can com­pa­ny which op­er­ates 12 KFC and two TGI Fri­day restau­rants.