Grand Parade Investments (GPI) says it will sell all of the shares it holds in Burger King South Africa – being 95.36% – to ECP Africa Fund as part of its restructuring process.
The deal also includes all of the shares it holds in Grand Foods Meat Plant.
The purchase price for Burger King is based on an enterprise value of R670 million, and R27 million for Grand Foods Meat Plant.
“Over the last 2 years management has undergone a process of restructuring the business with the main aim of reducing the discount to iNAV (indicative net asset value). This process involved discontinuing loss making business and improving the profitability of its operational food and manufacturing businesses.
“The restructure resulted in a vast improvement in profitability which assisted in reducing the discount,” it said by way of rationale for the deal.
It said that despite this improvement the company still trades at a large discount to indicative net asset value iNAV.
GPI said that management and its board decided that the best way to unlock value for shareholders is through a controlled sale of assets, with the sale of BKSA and Grand Foods Meat Plant representing the first phase of this strategy.
GPI has exclusive rights to develop and expand the Burger King brand in South Africa’s quick service restaurant market. It opened the first Burger King restaurant in Cape Town at 33 on Heerengracht in May 2013. It has since opened 92 restaurants at locations throughout the country.
Grand Foods Meat Plant operates a meat plant that includes a burger production facility built to EU standards and is a Halaal-certified supplier. Burger King is Grand Foods Meat Plant’s largest customer with more than 90% of the sales. The plant also supplies Spur with frozen patties as well as the Grill Father.
Burger King and Grand Foods Meat Plant have a combined net asset value of R509,039,205.
Burger King in South Africa
GPI published is financial results for the year ended June 2019 in September, reporting that Burger King finally started turning a profit in the country,
Burger King’s sales for the year increased by 34.2% from R756.2 million in the prior year to R1.015 billion in the current year, despite the economic downturn, and improved its previous loss of R27.1 million into a profit of R11.7 million for the period.
The growth in Burger King was driven by higher revenues from new restaurants opened and a significant improvement in same store sales of 10.3%, GPI said.
The net restaurant movement for the year totalled six, which included the opening of 10 new restaurants and the closure of four unprofitable restaurants.
The average monthly restaurant revenues (ARS) increased by 14.3% from R0.911 million last year to R1.042 million this year, largely as a result of positive restaurant comparative sales of 10.32% (2018: 3.45%).
A total of 18.6 million customers were served compared to 15.6 million in the prior year.
In March last year, GPI said that it would close its Dunkin Donuts and Baskin Robbins branches in South Africa which counted losses over R70 million.
The group said that it tried to find interested parties to buy the brands, but noted that it got no serious offers in the allotted period, leading to the businesses being liquidated.
“Dunkin’ Donuts and Baskin-Robbins continued to experience a challenging six months with the second quarter having the most significant impact on trading. The Group decided to exit
these brands based on the continued poor performance and a sustained period of losses.
“The exit of Dunkin’ Donuts and Baskin-Robbins is the first step of a broader strategy to revert back to an investment holding company,” it said.
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