Burger King South Africa sale back on the table following agreement with Competition Commission

SOUTH AFRICA – Grand Parade Investments (GPI), the master franchise holder for Burger King in South Africa can now breathe a sigh of relief after the Competition Commission has agreed to the revised terms of the take over.

Since beginning of last year, GPI has insistently pursued the sale of the US fast-food chain and Grand Foods Meat Plant (GFMP), which primarily supplies Burger King with patties, to a fund owned by Emerging Capital Partners (ECP), in line with its strategy to become a pure investment company.

As part of the initial agreement, GPI was meant to bag R697 million (US$45.9m) i.e., R670 million (US$44m) for Burger King South Africa (BKSA) and R27 million (US$1.7m) for GFMP.

However, Covid-19 shaved off a huge chunk of the agreed value, with the parties settling for R570m (US$37.5m) for BKSA, lower than the R700m (US$46.1m) that GPI initially paid and R23m (US$1.5m) for GFMP.

Despite the settlement of the enterprise value, the Competition Commission prohibited the transaction, objecting to the lack of black shareholding.

While the Commission found that the proposed transaction is unlikely to have an impact on competition in SA, it said that historically disadvantaged persons (HDPs) won’t hold any ownership of Burger King SA following the deal.

Grand Parade Investments to bag US$37.5m from sale of Burger King South Africa and US$1.5m for Grand Foods Meat Plant

This sent GPI and ECP back to the drawing boards and according to reports by FIN 24, the proposed takeover is now back on the cards.

In a recent statement to shareholders, Grand Parade said an agreement was reached with the Competition Commission on the revised set of conditions that addressed its concerns around the deal.

The revised conditions rested on four pillars. The first was a clear commitment to substantially expand Burger King SA, including R500m (US$32.9m) capital expenditure by 2026, increasing the number of outlets to 150 from 60, employing an additional, not less than 1 250 historically disadvantaged individuals as permanent staff, and increasing the payroll and employee benefits by no less than R120 million (US$7.91m).

The second pillar was the establishment of an enterprise supplier development programme, the details of which were deemed confidential, but which Majenge said represented a significant public interest factor in the transaction.

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The third pillar was the establishment of an employee share ownership programme that would give employees a 5 percent stake in Burger King South Africa, while the fourth pillar was the disposal of the Grand Meat Plant to a historically disadvantaged buyer, and which would also positively affect the employees’ interests in their share ownership programme.

The parties have submitted a request to the Competition Tribunal to reconsider and approve the transaction, subject to those revised conditions.

“The hearing to consider the merging parties’ request for the Competition Tribunal to approve the proposed transaction, subject to the draft conditions takes place today, 18 August 2021 and shareholders will be advised of the outcome of the hearing in due course,” Grand Parade said.

Burger King SA operates more than 90 fast-food restaurants across South Africa.

Meanwhile, South African fast-food chain Nando’s, best known for its spicy chicken meals, has had to shut temporarily over 40 outlets, about 10% of its restaurants, in the UK as staff shortages have led to disruption in the supply chain.

“The UK supply chain is having a bit of a (night)mare right now. This is having a knock-on effect with some of our restaurants across England, Scotland and Wales”, Nando’s said on Twitter.

In an attempt to get deliveries on track, the company has seconded 70 staff to suppliers and is hopeful that all its restaurants would be able to reopen soon, the Guardian reported.

“The UK food industry has been experiencing disruption across its supply chain in recent weeks due to staff shortages and Covid isolations, and a number of our restaurants have been impacted,” privately held Nando’s said in a statement.

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