The Competition Commission prohibited a proposed transaction whereby ECP Africa, a private equity fund intended to acquire Burger King South Africa and Grand Foods Meat Plant
(Pty) Ltd from Grand Parade Investments.
Who is Grand Parade Investments?
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(Pty) Ltd from Grand Parade Investments.
Who is Grand Parade Investments?
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Grand Parade Investments (GPI) is an empowering investment holding company that actively manages investments in its current focus areas of food and gaming.
In 2008, GPI listed on the main board of the JSE.
In 2008, GPI listed on the main board of the JSE.
How did Grand Parade Investments ended up owning Burger King South Africa?
In 2012, GPI entered the food industry with the acquisition of the Burger King master franchise.
GPI paid ~R700m for the master franchise.
Are master franchise expensive?
(
In 2012, GPI entered the food industry with the acquisition of the Burger King master franchise.
GPI paid ~R700m for the master franchise.
Are master franchise expensive?
(
https://twitter.com/MaanoMadima/status/1420104622409228291?s=19)
Granprade through its wholly owned group subsidiary, Utish Investments (Pty) Ltd. entered into a joint venture with certain subsidiaries of Burger King Worldwide, Inc to form Burger King South Africa (Pty) Ltd. (BKSA) joint venture.
In terms of the joint venture, BKSA will hold the master franchise for the Republic of South Africa and have exclusive rights to develop and expand the BURGER KING® brand in this country.
The first Burger King stored was opened in Cape Town.
The first Burger King stored was opened in Cape Town.
The total number of Burger King restaurants as at 30 June was 97 of which 90 are corporately owned.
The net restaurant movement for the year totalled 5, which included the opening of 8 new restaurants and the closure of 3 unprofitable restaurants.
The expansion was rapid.
The net restaurant movement for the year totalled 5, which included the opening of 8 new restaurants and the closure of 3 unprofitable restaurants.
The expansion was rapid.
Currently, GPI's effective interest in Burger King SA is ~91,1%.
For year ended 30 June, BKSA achieved annual revenue in excess of R1billion (R1.010 billion vs R1.015 billion in 2019) despite the lockdown.
BKSA has 2862 employees.
For year ended 30 June, BKSA achieved annual revenue in excess of R1billion (R1.010 billion vs R1.015 billion in 2019) despite the lockdown.
BKSA has 2862 employees.
Grand Foods Meat Plant (GFMP) is 100% owned by GPI.
GFMP is situated at Elsies River Industrial, Cape Town, is the sole supplier of beef patties to Burger King.
The plant also supplies Spur with beef patties as well as other smaller quick-service restaurant businesses.
GFMP is situated at Elsies River Industrial, Cape Town, is the sole supplier of beef patties to Burger King.
The plant also supplies Spur with beef patties as well as other smaller quick-service restaurant businesses.
Quick one on Spur Corporation and GPI's relationship.
GPI has a 9,1% effective interest in Spur.
Back to GFMP.
Grand Foods Meat Plant is directly influenced by Burger King’s performance as it is the main supplier to Burger King.
GFMP has 36 employees.
Revenue of R142 million.
GPI has a 9,1% effective interest in Spur.
Back to GFMP.
Grand Foods Meat Plant is directly influenced by Burger King’s performance as it is the main supplier to Burger King.
GFMP has 36 employees.
Revenue of R142 million.
Why are they selling?
Management of GPI has undergone a process of restructuring the business with the main aim of ⬇️ the discount to intrinsic NAV.
This process involved discontinuing loss making businesses (such as the voluntary liquidation of Dunkin Donuts and Baskin Robbins
Management of GPI has undergone a process of restructuring the business with the main aim of ⬇️ the discount to intrinsic NAV.
This process involved discontinuing loss making businesses (such as the voluntary liquidation of Dunkin Donuts and Baskin Robbins
Who are they selling to?
ECP Africa is a private equity firm focused on Africa that has raised over $3bn for PE investment in Africa.
ECP has made over 60 investments across the continent and has fully exited 45 of these investments returning over $1.3bn to investors to date.
ECP Africa is a private equity firm focused on Africa that has raised over $3bn for PE investment in Africa.
ECP has made over 60 investments across the continent and has fully exited 45 of these investments returning over $1.3bn to investors to date.
How much are they selling for?
The initial selling price was as follows;
BKSA - R670m (based on a ratio of 8x forward EBITDA ending 30 June 2020 of at ~R84)
R27m for Grand Foods Meat Plant.
The selling price was revised down in September to R570m for BKSA and R23m for GFMP.
The initial selling price was as follows;
BKSA - R670m (based on a ratio of 8x forward EBITDA ending 30 June 2020 of at ~R84)
R27m for Grand Foods Meat Plant.
The selling price was revised down in September to R570m for BKSA and R23m for GFMP.
GPI is selling its entire 91,1% stake in BKSA and will capitalise some loans to the firm amounting to a 4.7% stake leading to a total divestment of a 95.7% stake for ~R570 million
100% of Grand Foods Meat Plant for R23 million.
100% of Grand Foods Meat Plant for R23 million.
What will GPI use the proceeds for?
The proceeds will be used to partially settle debt and the remaining proceeds will
be returned to shareholders as part of GPI’s strategy to unlock value for shareholders through a controlled sale of its underlying assets.
The proceeds will be used to partially settle debt and the remaining proceeds will
be returned to shareholders as part of GPI’s strategy to unlock value for shareholders through a controlled sale of its underlying assets.
Why did the the Competition Commission prohibited this merger?
The Commission found that the merger would lead to a significant reduction in the shareholding of historically disadvantaged persons in BKSA, from more than 68% to 0% as a result of the merger.
The Commission found that the merger would lead to a significant reduction in the shareholding of historically disadvantaged persons in BKSA, from more than 68% to 0% as a result of the merger.
Commission also found that the BKSA and GFMP are ultimately controlled by an empowerment entity wherein historically disadvantaged persons (HDPs) have an ownership stake of more than 68%.
ECP has no ownership by HDPs.
The merged entity will have no ownership by HDPs and workers
ECP has no ownership by HDPs.
The merged entity will have no ownership by HDPs and workers
ECP intends to invest R500m in new Burger King stores, create 1,250 jobs and increase the black supply chain.
We know how this goes.
Increase BEE ownership, promise not to retrench for 3yrs, promise to buy from locals. After the 3yrs, companies sing a different song.
We know how this goes.
Increase BEE ownership, promise not to retrench for 3yrs, promise to buy from locals. After the 3yrs, companies sing a different song.
Transaction advisors chow big time from such transactions (
The estimated costs of preparing and distributing circulars, holding the general meeting and
implementing the disposal, including the fees payable to professional advisors, are ~R19 million.
https://twitter.com/MaanoMadima/status/1410924472694157312?s=19)
The estimated costs of preparing and distributing circulars, holding the general meeting and
implementing the disposal, including the fees payable to professional advisors, are ~R19 million.
Another example of how mergers and acquisitions deals benefit transaction advisors, but mostly investment banks.
https://twitter.com/MaanoMadima/status/1419977096814895106?s=19
Tembinkosi Bonakele Of the Competition Commission says it could reverse its decision to block the sale of BKSA and GFMP by Grand Parade Investments to US-based Emerging Capital Partners (ECP) if it improves its empowerment offer.
Remember when I said International Barbarians are at the Gates of SA companies? This is another example. ECP is a US based private equity firm.
https://twitter.com/MaanoMadima/status/1413551290722959363?s=19
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