SOUTH AFRICA – Cash-rich Spur Corporation plans to beef up its portfolio as the family restaurant chain is set to take on larger rival Famous Brands.

The owner of Spur Steak Ranches and Panarottis has a R295m war chest thanks to Grand Parade Investments (GPI) acquiring a 10% stake in the company earlier this year, in a share swap empowerment deal.

Spur, which on Thursday reported full-year results for the year to June, has committed about R100m to upgrade its production facilities and head office, but has R200m to play with as it looks to grow its new upmarket steakhouse brand, Hussar Grill, and fast-food chicken brand Captain DoRegos.

While CEO Pierre van Tonder would not be drawn on companies on its radar, analysts speculated that Spur could soon buy a stake in GPI itself, the company that has franchise rights to operate US fast-food giant Burger King in SA.

Such a deal would enable Spur to compete with Famous Brands’ fast-food brands, which include Steers, Wimpy and Fishaways

Spur’s restaurant sales across the group increased 13.5% to R5.5bn for the year to June, with diluted earnings increasing 3%. The share price closed 2.56% higher at R30.50 on Thursday.

GPI recently bought a 10% stake in Spur worth R295m, and Mr van Tonder said on Thursday the two groups were discussing how to leverage off one another.

“You could say the deal has made us engaged and we are discussing ways to benefit from the synergies between us.”

Spur was considering how it would spend the cash from the GPI deal beyond upgrading its head office and upgrading production facilities, Mr van Tonder said.

“At this stage, I would say we regularly look at various acquisition opportunities and will continue to do so.”

Analysts, however, speculated that Spur would buy a stake in GPI or foster another kind of deal to own Burger King stores in SA.

“The stars are aligning for Spur,” Vunani Securities analyst Anthony Clark said. “They have room to grow, following their investments in new brands a few years ago. It makes sense for them to buy a significant stake in the Burger King business in SA and compete with Famous Brands’ takeaway brands such as Steers.”

Mr van Tonder said he would not speculate on corporate action between Spur Corporation, GPI and Burger King. “At this stage we have GPI having bought 10% of us. We will watch to see how GPI rolls out the Burger King brand and continue our relationship.”

Jean Pierre Verster of 36One Asset Management said he expected the cash pile to be used to improve Spur’s supply chain. But, as opposed to taking a stake in GPI, he thought Spur might seek to bring brands to SA that it and GPI did not already offer.

Mr Clark said Spur was becoming a stronger option for investors than it used be.

“Taste Holdings is swimming in debt. Spur is practically debt-free and sitting with this cash pile. They also have room to grow in SA.

Famous Brands is so big that it is very difficult for them to add stores and brands domestically, but Spur can increase the footprint in SA,” he said.

September 12, 2014;