Grand plans?
News that Grand Parade Investments (GPI) could sell a chunk of its strategic holding in Spur Corp has done little to liven up its share price. GPI has not exactly made a mint on the Spur investment, but the fact that such a transaction is being contemplated suggests the group may be intent on pulling out the stops in rolling out Burger King outlets in the next 12 months.
With the recent R225m sale of its head office in the Cape Town city centre falling through, GPI — which prides itself on regular dividend payments — might feel more reassured with extra cash sloshing around the balance sheet.
It has already indicated that it will meet the 80-store target it agreed to when it signed the master franchise agreement with Burger King EMEA (Europe, Middle East and Africa). That will be a relief to shareholders, who must have picked up that the relationship between GPI and Burger King EMEA has sometimes been strained.
The bigger challenge, of course, is showing that Burger King is capable of dishing up decent profits while continuing an aggressive expansion strategy.
With sufficient operational bulk and (hopefully) the first profits flowing, GPI could play it smart by offering to sell effective control of Burger King SA back to Burger King EMEA, which might relish an opportunity to accelerate the pace of development not only in SA but in other emerging markets on the continent. GPI could cash out its start-up effort, and hopefully retain a significant minority stake in Burger King SA.
This would effectively mean GPI reverts to being an investment company, with its other main investments being significant minority stakes in Sun International’s Grandwest and Golden Valley casinos in the Western Cape, as well as the vibrant limited-payout machine operations.
Golden Valley is a potential trump card, as the Western Cape government is giving serious consideration to allowing an existing provincial casino licence to be transferred to the Cape metropole.
More importantly, relinquishing control at Burger King SA would cull debt and radically reduce capital expenditure and operating costs. A more balanced (less risky) GPI might be a more appetising prospect for a market hungry for sustainable dividends.
For sail?
I can’t help thinking that long-becalmed Grindrod, after launching its shipping arm on the Nasdaq, might come into play. The core freight and logistics hub is certainly looking increasingly attractive, and there might never be a better time for a predator to pounce.
A dream scenario for long-suffering shareholders would be competitive bidding. In this regard, imagine a scenario in which Bidvest and Psg-controlled Zeder (via Capespan) are both on the hunt for Grindrod assets to slot into their operations.
Though Bidvest would be a more obvious contender, a number of Grindrod’s operations would fit nicely into Capespan’s logistics segment. Zeder may also be interested in Grindrod’s agribusiness investments in Senwes and NWK.
Keep on trucking
Labat is once again trying to get into gear. Last week the company agreed on “high-level terms” with shareholders of logistics specialists Force Fuel and FFP to acquire the businesses in exchange for the issue of 30m new Labat shares at a premium price of 100c/share.
The deal looks sweet for Labat, which was last seen trading at 44c on the JSE. In the year to end-june, Force Fuel generated turnover of R290m and earnings before interest, tax, depreciation and amortisation (Ebitda) of R18m, while FFP showed revenue of nearly R1.1bn and Ebitda of about R737m.
Of course, investors will remember that Labat had to ditch its last big tilt at the transport sector when numbers at the target company did not stack up. It might be prudent to keep a brake on the enthusiasm.
Grand Parade Investments could play it smart by offering to sell effective control of Burger King SA back to Burger King EMEA