Spur Corporation and investment group Grand Parade Investments (GPI) said on Monday they had entered into talks that may result in significant implications for both companies going forward, with an industry analyst expecting GPI to cut down on its investment in Spur.
However, the two companies did not reveal the exact nature of the talks or when they are expected to be concluded.
GPI currently holds a 17.5 percent stake in Spur.
Spur said in a note to its shareholders it had entered into negotiations with its black economic empowerment shareholder, GPI, regarding a transaction involving the company’s securities, which if successfully concluded, might have a material effect on the price of Spur’s securities.
However, GPI reduced its stake from 18.5 to 17.5 percent in May last year, in a move it described as focusing on its franchise interest in Burger King.
Jordan Weir, a trader at Citadel, said it was fair to assume GPI would continue to whittle down its ownership stake in Spur.
“This follows GPI’s disastrous venture into two dessert chain stores, namely Dunkin’ Donuts and Baskin Robbins. The initial American fast-food brand-hype ultimately proved short-lived due to poor local adoption by consumers. In addition, the arrival of both brands on South African shores saw relatively expensive franchise fees impacting GPI’s cash flow negatively,” Weir said.
He added the Burger King business had proved to be a home run for GPI as it owned the rights to 91.1 percent of the burger chain’s South African dealings.
“The rapid roll out of roughly 69 stores and the positive buy-in from the South African public has resulted in reasonable success for GPI. The high-speed growth of the business has increased its role as a competitor to Spur. Burger King’s expanding business is beginning to bring up questions of possible ‘conflicts of interest’, when comparing GPI’s investment position in both companies,” Weir said.
Spur is well-known for its burgers and it also operates Spur Steak Ranches, Panarottis Pizza Pasta, John Dory’s Fish Grill Sushi, The Hussar Grill, Casa Bella, Captain DoRegos and RocoMamas.
GPI announced in February that it was exiting the poorly performing Dunkin’ Donuts and Baskin-Robbins.
Weir said the negative impact of the confectionary businesses, coupled with the potential to expand Burger King even more, had given GPI the perfect opportunity to either trim or sell down entirely on its holdings in Spur in order to create a source of strategic cash flow for the business, be it settling debts or focusing on other strategic investments.