DURBAN - Grand Parade Investments (GPI) surged more than 9percent on the JSE after the investment holding company announced the sale of Burger King South Africa and Grand Foods Meat plant for nearly R700million.
GPI said it would sell the two entities to Emerging Capital Partners, a private equity group with more than $3.2billion (R48.08bn) in funds raised.
GPI said Burger King had an enterprise value of R670m, while Grand Foods Meat plant was R27m.
The sales come 12 months after GPI closed down Dunkin Donuts and Baskin Robbins in South Africa due to poor performance. Burger King reported an improved operational performance in the year to end June and exceeded R1bn in sales after its sales increased by 10.3percent, boosted by the opening of 10 restaurants.
Chief executive Mohsin Tajbhai said GPI wanted to focus on maximising value for their shareholders in describing the strategic direction that GPI is taking.
“GPI has historically traded at a significant discount to the value of its underlying assets. In the last two years we implemented a focused, value-based strategy which aimed at reducing the discount at which the group’s share price trades relative to its intrinsic net asset value,” Tajbhai said.
“This has resulted in a substantial improvement in the profitability of our operational foods business and reduction in the overall discount from more than 40percent to between 20 to 30percent.” Tajbhai said that the group had decided to focus its capital towards high value potential assets.
He said GPI would also close unprofitable businesses and reduce debt through spinning off part of its stake in The Spur Group.
“This focused and value-based strategy has resulted in an improvement in profitability of all our foods business. In particular, Burger King South Africa has seen impressive growth both on the top line and in profitability, to the point where the asset has achieved an attractive valuation,” Tajbhai said.
Last year GPI sold 10 percent of its stake in Spur for R260m.
Burger King has more than 90 restaurants in the country.
Tajbhai said GPI would retain its valuable and saleable assets in SunWest, Worcester Casino, Mac Brothers, Spur and their property portfolio.
“With a strengthened balance sheet, we are under no pressure to offload these assets but rather, we are looking to maximise the value we can return to shareholders,” he said.
GPI shares rose 9.09percent on the JSE yesterday to close at R3.60.