SOUTH AFRICA – Grand Parade Investments (GPI), the master franchise holder for Burger King in South Africa is set to sell its 95.36 percent stake in Burger King franchise and all of Grand Foods Meat Plant to ECP Africa Fund for R697 million (US$46.53 million).
Grand Parade will maintain a minority interest in line with its strategy to become a pure investment company.
Emerging Capital Partners (ECP) is a Pan-African private equity firm that has raised over US$2 billion through funds and co-investment vehicles for growth capital investing in Africa. It has 60 investments that include Eco bank, MTN Cote d’Ivoire and leading bottler of carbonated soft drinks, Atlas Bottling Corp in Algeria.
The move comes as the group approved sell of its remaining 30% stake in Sun Slots for more than R500 million (US$34.3m) having exited Dunkin Donuts and Baskin-Robbins earlier in the year, as well as disposing of its stake in Spur.
GPI had signed a long-term master franchise agreement with Burger King in 2012, betting on South Africa’s lucrative fast-food market, consumer appetite for flame-grilled burgers and their price appeal.
However, South African retailers have been struggling to boost sales as a slowing economy, high unemployment rate and rising fuel costs reduced consumers’ spending power.
GPI has traded at a significant discount to the value of its underlying assets, Chief Executive Mohsin Tajbhai said, adding that the South African firm implemented a “value-based strategy” two years ago, aimed at reducing the discount at which the group’s share price trades relative to its intrinsic net asset value (iNAV).
“The board considered the sale of GPI’s stake in Burger King South Africa in the context of the group’s strategy of unlocking value for all shareholders and has decided that the best way forward is to initiate a controlled sale of assets,” Tajbhai said.
The Whopper Burger maker, which launched its restaurant in the South African port city of Cape Town in 2013, competes with market leader McDonald’s Corp and other restaurant chains such as RocoMamas.
Burger King, which has 92 restaurants across the country, generated a profit of 11.7 million rand for GPI last year, aided by higher sales from new restaurants and improving same-store sales.
Grand Foods Meat Plant operates a burger-making plant, with Burger King being its largest customer accounting for more than 90 percent sales.