Gold Brands stays on acquisition trail
In just seven days, AltX-listed Gold Brands has spent about R12.2m — the equivalent of just less than 15% of its market capitalisation of R82.5m — on deals. The latest, announced on Monday relates to the acquisition of a 50% stake in Hot-Hot B Holdings, which owns Hot Hot Burger Bar — a themed burger restaurant chain operating in Greece and Crete — for a consideration of €800,000.
The purchase consideration is payable in cash against profit warranties of €916,753 for the year ending January 31. Finalisation of the transaction is subject to the findings of a due diligence process.
The founders of Hot Hot would continue to manage the day-to-day operations of the business, Gold Brands said.
Vunani Securities small and medium cap analyst Anthony Clark said Gold Brands was “falling into the classic trap of trying to expand too quickly when their focus should be on fixing and growing what they already have”.
“I would be worried at all this rapid pace of running off and doing deals. Perhaps if Gold Brands actually focused on their struggling domestic business rather than doing deals offshore and then having to spend significant capex to open the local eateries of these offshore food brands … the company at its core may do better,” said Clark.
Last Monday, Gold Brands announced that it had signed a deal to acquire the South African rights of UK-based Casual Dining Group for £50,000.
“As it is Gold Brands has limited cash resources to expand,” said Clark. “Its core domestic business as in its last released results saw a decline in revenue and a fall in earnings,” he said.
Gold Brands is the owner of 1+1 Pizza, Opa!Pitaland, Chesanyama, Chicken Wild Wings and Blacksteer.
Gold Brands CEO Praxia Nathanael said the focus was on improving the company’s operations and processes.
“The acquisition of Hot Hot Burger, which is the fastest-growing burger concept in Greece, as well as the rights we have acquired for Casual Dining Group, is part of the strategic rationale to partner with international brands to raise our homegrown brands to global standards,” she said.
Based on the agreed profit warranties, the firm was confident that Hot Hot would be earnings accretive in its first year, Nathanael said.