McDonald's spat with Vikram Bakshi gets murkier: All you need to know

The ongoing spat between McDonald’s andVikram Bakshi, who was ousted as managing director of Connaught Plaza Restaurants Pvt. Ltd that runs McDonald’s outlets in North and East India, has taken an ugly twist as the latter hasaccused Hardcastle Restaurants, which runs McDonald’s operations in the west and south of the country, of influencing the US fast food chain “to take oppressive steps” against him.

Bakshi, who holds a 50-percent stake in Connaught Plaza Restaurants Ltd, moved the Company Law Board (CLB) on Monday seeking a stay on his removal and submitted thathe cannot be removed as MD of Connaught Plaza Restaurants through a general meeting of the company but only via aa meeting of shareholders of the company in accordance with law.

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“I am asking for continuance as MD. I cannot be removed by a general meeting. If I have to be removed then by the shareholders only,” Bakshi’s counsel S N Mukherjee submitted before the CLB, accrding to a PTI report.Mukherjee also requested the CLB to maintain a status quo regarding shareholding and composition of board of directors or the management of Connaught Plaza Restaurants.

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The CLB would hear the contentions of McDonald’s India and its Illinois-based parent firm and its nominated directors on CPRL on next Monday.

Bakshi has accused the American fast food chain “of implementing a pre-determined scheme of attempt to take over the Company (CPRL) in a coercive, oppressive and illegal manner contrary to law”.Bakshi claimed that since 2008, when the JV started making profits McDonald’s has been trying to buy him out of the company at lower valuations. The first offer was made in August 2008 for $5 million, which he said was “categorically rejected”. The offer was then upped to $7 million but when Bakshi did not agree McDonald’sinvoked the compulsory purchase by leveling ‘wrong charges against him’.

A report in the Business Standard saysMcDonald’s told Bakshi he was giving little attention to Connaught Plaza Restaurants Pvt Ltd, as his other businesses like hospitality and real estate were growing rapidly. The chain also said these businesses were in conflict with the JV, which was in a related area.

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“McDonald’s also questioned him for financial mismanagement, claiming he transferred Rs 7 crore from the JV’s account to one of his own group firms,” the report said.

However, Bakshi refuted these allegations and said themoney was drawn to acquire a prime location at an attractive price for a McDonald’s outlet which was in full knowledge of the board.

Moreover, Bakshi has alleged $7 million McDonald’s has offered for his stake is much lower than the market value of the venture that runs 154 outlets, media reports said.

Bakshi has also alleged that McDonald’s is trying to oust him in collusion with Amit Jatia’s Hardcastle Restaurants, which operates the fast-food chain in south and west of the country as it hadeven expressed its desire to buy out Bakshi’s entire shareholding saying that the Illinois-based company had given it the approval to do so.

“Even in 2011, in a meeting, the other joint venture partner for West and South-India Region expressed his desire to buy out the petitioner’s shares and categorically informed Petitioner No 1 (Bakshi) that McDonald’s had given him tacit approval for the same,” he has said in the petition.

“The West & South-India Region joint venture partner also went to the extent of saying that McDonald’s would not let the petitioners function effectively if they refuse to sell out,” he added in his plea.

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,” The Economic Times quotes Bakshi as saying in his petition.

According to a report in the Hindustan Times, a private equity deal valued Hardcastle Restaurants that runs the operations of McDonald’s in western and southern India at Rs 5,187 crore.

“The franchise runs 166 restaurants and was valued over Rs 5,000 crore. The offer made to Bakshi was much lower than the fair value,” a source told the paper, adding that Bakshi’s stake should be worth over Rs 2,500 crore.

The feud between McDonalds and Bakshi became public onlylast 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 was later revealed that McDonald’s nominees on the Connaught Plaza board blocked his reappointment as managing director.