Grand Parade Investments has sold the Burger King franchise in SA to Africa-focused Emerging Capital Partners.
Picture: 123RF/FRANCIS DEAN
Burger King’s new owners, Emerging Capital Partners (ECP), plan to more than double the number of stores in SA in the next five years, says MD Paul Maasdorp.
Leisure and gaming company Grand Parade Investments (GPI) on Wednesday said it would sell the Burger King franchise in SA to ECP, which has concluded other food-related transactions in Kenya recently.
GPI, which has market capitalisation of R1.69bn, said it would also sell wholly owned Grand Foods Meat Plant, which supplies burger patties to Burger King, to the Africa-focused ECP.
The announcement saw GPI’s shares gain 9.09% to R3.60, the biggest one-day gain since April 10 2019.
The sale of the two assets for R697m is part of GPI’s strategy to reduce a discount to its net asset value (NAV) per share. The discount indicates that GPI’s shares trade at a price lower than the value of its underlying assets.
Speaking from Kenya, Maasdorp said ECP intends to increase Burger King’s footprint as it had done with previous food investments.
In 2012, the company bought Kenya’s Java House Group, which had 12 restaurants at the time. By the time ECP sold the casual dining and coffee chain in 2017, Java House had more than 50 restaurants.
In December 2018, ECP bought a majority stake in Kenyan restaurant chain Artcaffe Group. “In about 14 months, we have increased the number of restaurants from 26 to 39,” Maasdorp said. “In the next five years we intend to more than double the number of Burger King restaurants,” he said.
Burger King has 92 outlets across SA.
Maasdorp said the growth would be concentrated in the country’s major urban centres. “Certainly Johannesburg and Pretoria are underpenetrated,” Maasdorp said.
He was optimistic about Burger King’s growth prospects despite the pressure on SA consumers.
GPI CEO Mohsin Tajbhai said the transaction was part of the company’s “controlled” sale of assets. Other assets the firm could sell include its 9.28% stake in steakhouse franchise restaurant Spur Corporation, Tajbhai said.
GPI’s investment in the food industry has in the past come under criticism, especially after the firm closed loss-making Dunkin’ Donuts and Baskin-Robbins chains early in 2019.
But Tajbhai stood by GPI’s investment in Burger King. “The decision to move away from gaming into food is something that the market questioned. But from where we picked up (Burger King) and where we finished, it has been phenomenal. It has been extremely valuable for GPI,” he said.
“The strategy at the moment is to achieve value unlock through the controlled sale of assets. We are trading at a discount. We are looking at disposing of our assets to unlock that value. Historically, the market never really valued our food business.”
Compared with other quick-service restaurants, Burger King had performed well, said Tajbhai. He cited Burger King’s same-store sales growth of about 8%. Same-store sales refers to the difference in revenue generated by a retail chain’s existing outlets over a certain period.
“Burger King has been a very good investment. The business had its challenges initially, which we have overcome in the past few years. We have seen phenomenal growth in the past two years. Under our guidance, the significant improvement in performance of the business over the past two years, as evidenced by a quadrupling in ebida (earnings before interest, depreciation and amortisation) and positive net profit after tax for the last financial year, has instilled some confidence in the market.”
Source: Business Day – www.businesslive.co.za