Francis Mackay, chief executive, and Roger Matthews, finance director, are in the US. The target is understood to be Canteen Corporation of America, owned by Flagstar but controlled by Kohlberg Kravis Roberts, the investment company.
Shares in Compass, which also said it would make a rights issue to fund half of the acquisition cost, fell 13p to 316p.
Flagstar needs to sell Canteen Corporation to ease the pressure from dollars 2.3bn of debts and provide a pay-back for KKR, which provided some financial relief in 1992 by taking a controlling interest.
The initial reaction from analysts to the scant details released by Compass was largely negative. One said: 'Compass is still a pretty small company to do a deal which amounts to 50 per cent of its stock market capitalisation.
'It is also on the other side of the world, and is going to frighten people no end.'
Another said he was surprised that Compass was turning its acquisitive sights towards America.
'Compass had indicated with its full-year results at Christmas that the way forward was in the UK and Europe,' he said.
Recent stock market speculation had pointed towards another deal in Europe following last July's rights issue-funded pounds 72m purchase of SAS airport catering in Scandinavia.
Analysts were also concerned about the size of the rights issue. 'With a pounds 150m cash call, you are talking about terms of one-for-three,' said one. 'I don't think the rights is going to go very smoothly.'
Compass declined to expand on its brief statement. It expects to make another announcement when negotiations are completed.
Bottom Line, page 34Reuse content