Famous Brands acquires 51% stake in Retail Group

Famous Brands group CEO CEO Kevin Hedderwick (Supplied)
Famous Brands group CEO CEO Kevin Hedderwick (Supplied)

Cape Town - Famous Brands has acquired a 51% controlling stake in Botswana's Retail Group, the group’s master licence partner in Botswana.

This marks the start of a new thrust in Famous Brands’ strategic growth programme, Africa's leading quick-service and casual dining restaurant franchisor said in a statement on Tuesday.

Group chief executive Kevin Hedderwick said the transaction aligns with Famous Brands' deliberate approach to either acquire or take a controlling stake in existing master licence territories in neighbouring countries through which it can exercise complete influence over its brands.

"In addition, we want to test our mettle in company-owned stores in advance of a potential broader foray into that arena.  This transaction provides us with the opportunity to achieve both goals at minimum risk,” he said.

Hedderwick added that Famous Brands continues to set itself ambitious growth targets, “and this strategy affords us a strong new avenue for expansion”.

Famous Brands said the purchase consideration falls below the threshold of a categorised transaction in terms of the listings requirements of the JSE and will be settled from cash reserves. The transaction is subject to approval from the Competition Commission of Botswana.

Retail Group is currently owned by a consortium of investors, with the majority stake held by Craig Mackenzie, a long-standing business partner of Famous Brands and founder of Debonairs Pizza in 1991.

Established in 2000, Retail Group comprises 19 company-owned restaurants and manages nine franchised restaurants across Botswana. The portfolio of brands includes Wimpy, Debonairs Pizza, Mugg & Bean, Milky Lane and Steers.

Famous Brands said given the group’s critical mass in the region, opportunities will be investigated to provide the business with in-house logistics and manufacturing services, which are currently outsourced. The operation will also benefit from Famous Brands’ expanding brand portfolio.  

According to Mackenzie the deal fully aligns Retail Group with Famous Brands, which provides the business with more effective access to the extensive resources afforded by Africa’s leading franchise group. "We believe that the resulting blend of skills and experience will culminate in strong growth opportunities for the operation in Botswana and beyond.”

Illustrating the compelling rationale for the transaction, Hedderwick said the food services sector in Botswana is growing rapidly, reflected by the 44% increase in franchised food service outlets industry-wide in the past five years.

Per capita gross domestic product of $16 400 is the third highest in Africa, ahead of Mauritius and South Africa.

“Political and economic stability have resulted in a stable labour market, while relatively lower tax and VAT rates compared to South Africa offer a further incentive for investment,” Hedderwick said.

As at February 28 2015, the contribution from Famous Brands’ rest of Africa business comprised 8.9% of total system-wide franchise sales.  

Hedderwick said Famous Brands has stated frequently that it has ambitious and deliberate plans to grow its business outside South Africa, and he foresees the group's operations in the rest of Africa becoming increasingly significant to the group over time.  

"This acquisition advances our stated strategy to continue to build on existing momentum in the region in line with our first-to-market and narrow-and-deep strategy,” he said in the statement.

ZAR/USD
16.82
(+0.44)
ZAR/GBP
21.27
(+0.38)
ZAR/EUR
19.07
(+0.63)
ZAR/AUD
11.76
(+0.55)
ZAR/JPY
0.16
(+0.57)
Gold
1815.33
(+0.42)
Silver
18.98
(+1.61)
Platinum
855.00
(+0.91)
Brent Crude
43.32
(+0.49)
Palladium
1940.85
(+1.95)
All Share
56189.73
(+0.57)
Top 40
51866.47
(+0.60)
Financial 15
10271.31
(-0.04)
Industrial 25
78014.98
(+0.66)
Resource 10
53130.23
(+0.64)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1828 votes
I am taking a hit, but should be able to recover in the next year
23% - 2393 votes
My finances have been devastated
34% - 3568 votes
It's still too early to know what the full effect will be
25% - 2564 votes
Vote