SOUTH AFRICA – Grand Parade Investments (GPI), a South African restaurant and gaming group, has said it will sell its 10% stake in Spur Corporation back to the steakhouse company, freeing it up to focus on its Burger King franchise.
GPI had acquired 10.8-million shares. Equivalent to 10% stake from Spur in 2014 for US$20.92 million (R294.7m) in a deal that included a five-year “lock-in period” to end-October 2019.
However, the company has said it would dispose of its shares, which would be repurchased by Spur Corp for US$18.49 million (R260.4m), reports Business Day.
GPI said it would use the proceeds to reduce debt in order to improve profitability and cash generation as well as invest the proceeds in its Burger King business which, it said has shown positive results.
In the six months ended December 2018, the company posted growth in revenues by more than a third but, however, Burger King’s headline loss in the local market widened 66% to R9.5m “because of some underperforming restaurants,” GPI said.
The company has been struggling to make a success of its international food franchises and in February this year liquidated its loss-making Dunkin’ and Baskin-Robbins outlets.
GPI said that the Spur share sale aligns with the company’s strategy to “unlock value and create sustainability for all stakeholders.”
In a separate statement, Spur has also said that it will repurchase 6.64-million shares held in the Treasury, representing 6.12% of the total issued share capital of Spur at a market value of R21.91 per share, for a total consideration of US$10.32m (R145.39m).
“Spur has a sizeable cash balance with no immediate material investment opportunity that meets the investment criteria of its board.
“It is envisaged that the utilisation of its cash resources to implement the GPI repurchase will be beneficial to existing shareholders of the company, as it will enhance the company’s earnings, return on equity and future dividends,” it added.
GPI has also appointed its acting chief executive, Mohsin Tajbhai, as the new CEO effective July 1.
Tajbhai was first appointed as an executive director in November 2018 and has been acting in the position since January this year following the resignation of Prabashinee Moodley in December 2018.
Moodley had stepped down from her position due to the market sentiment towards the Quick Service Restaurant Industry, according to a GPI statement. She was the second CEO to resign from GPI in 2018.
