Grand Parade Investments gets go ahead from Competition Tribunal to dispose Burger King

SOUTH AFRICA – The South African Competition Tribunal has approved the sale of Burger King South Africa and Grand Foods Meat Plant by Grand Parade Investments to international private equity fund Emerging Capital Partners (ECP) Africa.

Following the green light, GPI can now move ahead with the disposal of the business to pan-African private equity firm ECP – pending all the final approvals.

This comes after the deal hit a speedbump earlier this year due to concerns around a lack of BEE shareholding in the acquiring firm.

The Competition Commission made history on June 1 by prohibiting the sale of the fast food franchise and its main supplier, Grand Food Meat Plant, on public interest grounds and not concerns around competition.

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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.

By August, the parties and the commission agreed to a revised set of conditions, pending approval by the tribunal.

“GPI is pleased to advise shareholders that the Competition Tribunal approved the proposed transaction on 17 September 2021,” Grand Parade said.

The approval has also come with a host of conditions attached and requirements to be met within a period of five years.

At the top of the list is that ECP will have to channel at least R500 million (US$33.8m) aggregate capital expenditure and establish at least 60 new Burger King outlets in the country, increasing the total number of outlets to at least 150.

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The number of permanent BKSA employees will have 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 to be not less than R120 million (US$8.12m).

The company would also have to improve its rating for the Enterprise and Supplier Development element under its B-BBEE scorecard.

Additional merger conditions require that Burger King establish an employee share ownership programme for an effective 5% interest in BKSA.

ECP Africa Fund must also dispose of Grand Foods Meat Plant; and BKSA must conclude a supply agreement with Grand Foods Meat Plant and/or the purchaser of Grand Foods Meat Plant.

The first Burger King restaurant in South Africa opened in May 2013. Grand Parade announced plans to sell the restaurant chain and the meat plant in 2020, as part of the group’s strategy to focus on operations that would unlock value for shareholders.

The initial price for the franchise was R670 million (US$45.32m), but following the Covid-19 pandemic which sent fast food chains and restaurants into crisis, Burger King SA was revalued at R570 million (US$38.56m), while the meat plant carried a revaluation of R23 million (US$1.56m), down from R27 million (US$1.83m), before.

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