Can AmRest afford to swallow Sfinks?

AmRest, the operator of KFC, Pizza Hut and Burger King restaurants throughout Poland and the CEE region, has announced that it is considering the takeover of Sfinks, the company which owns the popular Sphinx brand restaurants and the Chłopskie Jadło chain of restaurants.

Appetite for expansion

AmRest made the announcement after buying a five-percent stake in Sfinks last week. "If we make this sort of purchase it is not to treat it as a financial investment, but rather as a long-term investment aimed at consolidating both businesses," AmRest chief operating officer Wojciech Mroczyński told TVN CNBC.

After the announcement was made, Sfinks' shares - which had fallen 30 percent below their 2006 IPO price - rose 17 percent.

Market observers said a buyout of Sfinks would aid AmRest to expand beyond its core fast-food business and give it access to prime locations in Poland's main cities.

"We began buying Sfinks shares because - taking our leverage and regional development strategy into account it's a very interesting investment," said AmRest chiefexecutive Henry McGovern. "Both the restaurants themselves and their locations interest us."

Expensive taste

One of Sfinks' largest shareholders was also quoted as saying that a takeover of Sfinks by AmRest would make sense, but that talks had stalled over the price tag. "AmRest does fast food, we do casual dining and together we could create the leading restaurant group in the region," the shareholder, who asked not to be named, told Reuters.

"It's a question of price … even a 20- or 30-percent premium above the current market price does not interest us," the source said.

Sfinks is controlled by its founder, Tomasz Morawski, who holds a 44.5-percent stake and heads its supervisory board.

Second helping

In May, AmRest agreed to buy an 80-percent stake in the second- largest franchisee of the Applebee's restaurant brand in the US.

"This [Sfinks deal] looks a lot more interesting than the acquisition in the United States," said Michał Potyra, an analyst at Unicredit in Warsaw. "Sfinks' jump in price, after steep declines, suggests the market expects AmRest to announce a tender," he added. "AmRest can offer Sfinks economies of scale."

Though Poles have been riding a wave of healthy economics and wage growth since joining the EU in 2004, they still spend significantly less of their income on eating out than their counterparts in Western Europe. (Reuters)