Green light for sale of Burger King, with additional empowerment
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GRAND Parade Investments’ (GPI) sale of its Burger King South Africa (BKSA) franchise to the ECP Africa private equity fund has finally been approved by the Competition Tribunal after the companies were forced to add to the empowerment credentials of the deal.
The Competition Commission made history on June 1 by prohibiting the sale of the Burger King franchise and its main supplier, Grand Food Meat Plant, on public interest grounds.
The decision was on the basis that the sale would reduce the proportion of black ownership from 68 percent to 0 percent.
The companies went to the drawing board and re-submitted the application to the competition authorities.
GPI said yesterday that the Competition Tribunal had approved the transaction on condition that at least R500 million be invested in BKSA within five years and that at least 60 new Burger King outlets be established to increase the total number to at least 150.
The number of BKSA employees had to be increased by at least 1 250 historically disadvantaged persons, and the total value of payroll and employee benefits in respect of the 1 250 employees had to be not less than R120 million.
BKSA would also have to improve its rating for the Enterprise and Supplier Development element under its B-BBEE scorecard.
Additional conditions require that BKSA establish an employee share ownership programme for an effective 5 percent interest in BKSA, that ECP Africa Fund dispose of the meat plant and that BKSA had to conclude a supply agreement with the plant or its purchaser.
The first Burger King restaurant in South Africa opened in May 2013. In July last year, when the sale was first announced, GPI said it would sell BKSA for R570m and the meat plant for R23m, but an updated price that the deal was struck at, considering the new empowerment terms, was not given yesterday.
GPI directors could also not be reached for further comment.
Most of the value in GPI is represented by its investments in Sunslots and Grandwest Casino in Cape Town. GPI reported a R6.72m loss in the six months to December from R78.46m profit the previous year, due mainly to the impact of the Covid-19 pandemic on its investments.
GPI said the sale of BKSA and of the meat plant was its first step in a value unlock strategy, through the controlled sale of assets, with the aim of reducing the discount to net asset value that GPI trades at.
At that time, the group estimated the discount at over 40 percent, based on the share price then.
ECP Africa Fund has been investing in Africa since 2000, with over 70 investments and nearly 60 investments exited.
In Southern Africa, its investments include in the cable television and internet services company Wananchi, one of the largest money transfer companies on the continent, Mukuru, and Ecobank.
The date for all the conditions to be fulfilled for the transaction was extended to October 4. Grand Parade shares closed 2.07 percent higher at R2.96 on the JSE yesterday.