Vikram Bakshi alleges McDonald's of piling pressure; moves Company Law Board
Bakshi has denied McDonald’s charge that the latest review of January 25, 2013, disclosed as many as 13 high-risk control issues with significant operational and regulatory repercussions.
McDonald's has sent a call option notice on August 16 to Vikram Bakshiand is adopting coercive tactics in a bid to buy his stake in their equal joint venture company at a cheap price, the estranged Indian partner has claimed in his petition to the Company Law Board (CLB) on Monday.
Call option is an instrument that gives right to a shareholder to buy the other partner at a pre-determined price and date. Bakshi has filed, as an annexure to his petition, a letter he has recently written to the two McDonald's nominees on the board ofConnaught Plaza Restaurants, the 50:50 joint venture that operates the burger chain's outlets in the northern and eastern parts of the country.
In the letter, Bakshi says McDonald's has been trying to buy him out and oust him from the joint venture for a long time. It first tried to acquire his stake in 2008 for $5 million, and subsequently raised the offer to $7 million. Then in 2011, Hardcastle Restaurants Private Ltd, McDonald's other Indian partner, offered to buy him out with the approval of the US company.
Bakshi has said in early 2012, Tony Lorraco, McDonald's vice-president, franchising, repeated what Hardcastle had told him. "When I inquired whether McDonald's was willing to buy me, I was told not to be concerned about who would buy my shares but should only be concerned about the money," Bakshi says in the letter. He further alleges that instead of rewarding Connaught Plaza for its consistently good performance, McDonald's entered into a conspiracy with Amit Jatia-run Hardcastle Restaurants. It wanted to buy his stake and hand over the business to Jatia.
Hardcastle operates McDonald's stores in west and south India. A Hardcastle spokesman said the company could not comment on the matter as it did not have information on what had been filed in CLB. An email sent late Monday evening to McDonald's spokesperson in Singapore did not elicit a response.
The McDonald's-Bakshi feud became public last month when the US company issued a public notice stating that its Indian partner for the last 17-18 years had ceased to be the managing partner of the joint venture company. It subsequently emerged that at a meeting on August 6, the McDonald's nominees on the Connaught Plaza board blocked his reappointment as managing director.
Bakshi has claimed that the US company forced an internal general controls review (GCR) on the joint venture company in 2007, with an agenda to deliberately project the internal systems in negative light to arm-twist the Indian shareholders at a throwaway price. He has stated that not a single balance sheet between 2007 and 2011 carries any qualification in relation to non-compliance of any accounting standards or any breaches of FCPA/anti-bribery/conflict of interest provisions.
Bakshi has denied McDonald's charge that the latest review of January 25, 2013, disclosed as many as 13 high-risk control issues with significant operational and regulatory repercussions. He has also refuted allegation that he failed to conduct due diligences on third parties or failed to obtain comparable data on lease transactions.
He has also rubbished McDonald's claim that he drew Rs 7 crore from Connaught Plaza and diverted it towards his own group company. The transaction was done in the best interest of the joint venture to acquire a prime location at an attractive price and this was in full knowledge of the board, Bakshi said.
Connaught Plaza operates 154 McDonald's outlets in north and east India. According to Bakshi, during the last 18 years, the company has paid initial fee and royalty of Rs 193 crore to McDonald's and the US company is expected to earn over Rs 200 crore as royalty over the next three years. "The total share capital contributed by McDonald's (by equity and preferential shares) has already been extracted in totality. Every payment, henceforth, is free money for McDonald's, with a projection of Rs 20 crore to be earned in the balance months of 2013 itself. In stark contrast, the Indian shareholders have not received any dividend throughout this 18-year period," says Bakshi's letter.
Source : By Ratna Bhushan & Chaitali Chakravarty, ET Bureau