Wildflour takes $15-M investment at P3.4-B valuation

The Wildflour Hospitality Group (WHG) [link] took a US $15 million investment from private equity firm KV Asia Capital (KVAC) for 25% of WHG. The company will use this to fuel the expansion of its flagship Wildflour “premium casual” restaurant brand with “at least 10 additional new locations over the next 18 months.” The cash will also go toward building out WHG’s complementary brands such as Pink’s Burger, Hotdog, and Shakes. The Inquirer article mentions that “sources” have said that a Wildflour IPO could happen “within the next two years.”

MB BOTTOM-LINE: I’m covering this story for two reasons: (1) because it’s interesting to show how private equity fits into the overall IPO narrative, and (2) because Wildflour is pretty close to my heart and I like to talk about it. To the first point, a potential Wildflour IPO has been whispered about for at least a couple of years now, but it’s been difficult for those sparks to catch fire in the wet tinder of our depressed market. So what does a company do if the public market vaguely sucks and rates are still high enough to make debt a less attractive option? It looks to sell a minority stake to an investor and use the money to expand while it waits for market conditions to improve. Investors come in two main flavors: strategic and financial. Strategic investors usually have some subject-matter experience and are interested in exploiting some synergies between the two companies that will be worth more than the sum of the partnership’s parts. They’re usually long-term investors who remain onboard to provide mentorship and market opportunities for years (or even decades). Financial investors are those who invest with a shorter time horizon in mind. They’re not usually in the same line of business as the target company (though they could have a portfolio of similar businesses and possess elevated domain knowledge), but they have money and are looking for opportunities to put that cash to work for a (relatively) quick gain. KVAC is a financial investor, and if the “sources” are correct, they’re probably looking to do the same thing that Coherent Cloud did with its investment into Converge [CNVRG 9.19, up 2.1%]; fund growth, clean up the balance sheet, and solidify the all-important “growth story” for an eventual IPO. Whether KVAC uses the IPO to fully exit its position isn’t clear, but with a 25% stake, it’s likely that it will need to remain on board through the IPO and subsequent mandatory lockup period.

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