More time for Burger King sale
• Company is engaging with Competition Commission, which wants to block deal with Emerging Capital Partners
Leisure and gaming company Grand Parade Investments has pushed back the timing of the disposal of Burger King SA by two more months, as it engages with competition authorities, which recommended the sale be blocked. The deadline for meeting the conditions of the sale have been extended to September 20.
Leisure and gaming company Grand Parade Investments (GPI) has pushed back the timing on the disposal of Burger King SA by two more months, as it engages with competition authorities who have recommended the sale be blocked.
The Competition Commission said in June the merger would significantly reduce the shareholding of historically disadvantaged people, from 68% to 0%, marking the first time a merger had been blocked outright on grounds of public interest alone.
The decision sparked fierce criticism and warnings that black-owned businesses would find it harder to sell their assets, while foreign investment would also be reduced.
GPI said on Tuesday the deadline for meeting the conditions of the sale had been extended from July 19 to September 20 as engagements with regulators continue.
The Cape Town-based investment holding firm, which has minority stakes in Sunwest International casino and catering group Mac Brothers, has been trying to sell the rights to Burger King in SA since 2020, and is pursuing asset sales as it tries to narrow the discount to which its shares trade.
GPI announced in February 2020 that it had reached a deal to sell its 95.36% stake in Burger King SA and the 100% it holds in Grand Foods Meat Plant to private equity outfit Emerging Capital Partners (ECP) Africa Fund IV.
The deal was initially meant to be concluded in June 2020, but on July 29 2020 GPI announced that the terms of the sale had been renegotiated after Covid-19 wiped off about R100m of Burger King SA’s value.
The renegotiated terms assigned an enterprise value of R570m to the franchise, down from R670m when talks were first announced , and lower than the R700m GPI initially paid for the franchise rights.
Grand Parade is pursuing the sale to unlock value for shareholders, and its management estimates its shares were trading at more than a 40% discount as of its six months to end-December.
The merger parties had argued that ECP planned to spend R500m opening new stores, creating jobs, while the transaction would have also resulted in payment of about R498m to GPI, most of whose shareholders are not white. US-based ECP had agreed to create a 5% black empowerment stake within two years.
The decision was also enough for SA business representative body Business Unity SA to question whether competition law was the appropriate mechanism to advance transformation and promote black ownership in the economy.
The commission in turn had said it was simply enforcing the law, while the Competition Tribunal must still make the final decision on whether to permit the sale.
In morning trade on Tuesday GPI’s shares were unchanged at R2.82, having risen 15.57% so far in 2021, but having fallen by more than a fifth since the beginning of 2020.
IT IS PURSUING ASSET SALES AS IT TRIES TO NARROW THE DISCOUNT TO WHICH ITS SHARES TRADE
GRAND PARADE IS PURSUING THE SALE TO UNLOCK VALUE FOR SHAREHOLDERS