Listed food and gaming empowerment group, Grand Parade Investments, (GPI) announced on Wednesday that it has renegotiated the terms of an agreement to sell 100% of its interest in Burger King South Africa (BKSA) and Grand Foods Meat Plant (GFMP) to private equity group Emerging Capital Partners (ECP).
GPI launched the US fast food brand Burger King in South Africa in May 2013.
Under the revised offer, the enterprise value for the transactions has fallen to R593 million, split into R570 million for Burger King SA and R23 million for Grand Foods Meat Plant. This represents a 15% discount on the initial offer of R670 million for BKSA and R27 million for GFMP.
According to a statement issued by GPI, the decision to renegotiate the deal was due to the impact that the Covid-19 pandemic and related lockdown had on the business.
The deal has been renegotiated on a cash basis with no earnings warranties, as opposed to the initial offer which was subject to an earnings warranty for the 2020 financial year.
"Although the current offer is a 15% discount to the initial offer, we feel that the discount is fair given the additional risk and uncertainty caused by the Covid-19 pandemic," said GPI CEO Mohsin Tajbhai.
"The current deal equates to over R1/share in value to GPI shareholders and is in line with GPI's strategy to unlock value through a controlled sale of assets. The conclusion of the sale will allow GPI to reduce gearing and return capital to shareholders through a special dividend."
Paul Maasdorp, managing director and partner at ECP, says the group's ambition remains the same, namely bringing Burger King products closer to consumers and local communities in South Africa while enabling the brand to grow in terms of employment and product offering.
GPI's attempts to launch US fast-food brands Dunkin Donuts and Baskin Robbins in SA failed. However, GPI's results for the six months ended 31 December 2019 showed improved results for Burger King, with revenue growth of 27.5% compared to the previous period. GPI had cut back on Burger King's restaurant growth, focusing instead on improved profitability.