Grand Pa­rade pre­par­ing Burger King Africa roll-out

Finweek English Edition - - INSIDE - BY TANDISIZWE MAHLUTSHANA

Hassen Adams, the chair­man of Cape Town-based black em­pow­er­ment in­vest­ment hold­ing com­pany Grand Pa­rade In­vest­ments (GPI) which owns Burger King South Africa, says that the quick-ser­vice res­tau­rant group’s foray into the rest of Africa will be hugely aided by its re­cent tie-up with Spur Cor­po­ra­tion.

Burger King’s Africa ex­pan­sion, which in­cludes big coun­tries like Nige­ria, is set to take shape well be­fore the end of the year, ac­cord­ing to Adams. “We’re cur­rently in ne­go­ti­a­tions and work­ing on con­tracts with var­i­ous play­ers in­clud­ing gov­ern­ments in Africa, look­ing to pin down a huge deal for Burger King, but I can­not say much more than that at this stage,” Adams told Fin­week.

An e mpower ment deal wa s an­nounced last week that sees GPI

ac­quire 10% of Spur in a deal funded through a com­bi­na­tion of ex­ist­ing GPI cash re­sources (R72.3m, rep­re­sent­ing 24.55% of the f und­ing re­quire­ment) and pref­er­ence share fund­ing from Spur (R72.3m, 24.55%) and from Stan­dard Bank ( R150m, 50.9%). The i nvestment will re­sult in a net cash inf low of R222.3m for Spur.

The deal makes GPI the sec­ond-largest share­holder in Spur af­ter fund man­ager Al­lan Gray, which owns 16% of the multi-brand res­tau­rant fran­chisor.

Spur, which op­er­ates through brands l ike Spur Steak Ranches, Pa­narot­tis, John Dory’s and Cap­tain DoRe­gos, has ex­po­sure in a num­ber of African mar­kets in­clud­ing Nige­ria, Kenya and Malawi, with a to­tal of 479 restau­rants across the rest of Africa in­clud­ing South Africa (429 out­lets), Europe, Aus­tralia and the UAE.

Jean-Pierre Ver­ster, an an­a­lyst at 36One As­set Man­age­ment, says the deal with Spur makes a lot of sense for Burger King’s ex­pan­sion into the rest of Africa as Spur al­ready has the in­fra­struc­ture in place, which would help Burger King to hit the ground run­ning. “The deal is a good one for both play­ers – there’s the cash com­po­nent for Spur and the shar­ing of the sup­ply chain where GPI can add value by sup­ply­ing Spur with meat and other in­gre­di­ents, as well as the ex­pe­ri­ence and lessons that Spur has do­ing busi­ness in Africa that will be ben­e­fi­cial to GPI’s Africa strat­egy for Burger King,” says Ver­ster.

The em­pow­er­ment trans­ac­tion gives GPI a seat on Spur’s board. For most of its life GPI has been play­ing as a BEE part­ner with no sig­nif­i­cant po­si­tion to add value to the com­pa­nies it was buy­ing into. Adams said that the group is done play­ing sec­ond fid­dle and act­ing as win­dow dress­ing in em­pow­er­ment deals.

Through the Burger King roll-out, and Africa ex­pan­sion, GPI is look­ing to cre­ate about 40 000 jobs in South Africa, es­pe­cially on the train­ing and sup­ply side, says Adams.

Burger King opens its 20th store in Parow, Cape Town, this week and ex­pects to open another 20 be­fore the end of the year. It is ex­pected that there will be a to­tal of 100 stores in SA by June 2015.

All of the Burger King out­lets are owned out­right by GPI and a fran­chis­ing model is not on the cards. The group looks set to add fur­ther value for its share­hold­ers through a prop­erty port­fo­lio that is be­ing cre­ated via var­i­ous in­vest­ments in­clud­ing all the prop­er­ties of the Burger King drive-through restau­rants that are owned by GPI.

GPI has a R2bn wind­fall t hat it ex­pects to re­ceive from the sale of its gam­ing as­sets to Sun In­ter­na­tional, pend­ing the gam­ing board’s ex­pected ap­proval, and a fur­ther R1bn from var­i­ous other dis­pos­als. With such a low-geared busi­ness, there are count­less op­por­tu­ni­ties it can spend the cap­i­tal on.

Adams says that for now he prefers to play his cards close to his chest and would only say that “there is much, much more to come from the GPI and Spur deal”.

One of the South African suc­cesses

“WE’RE CUR­RENTLY IN NE­GO­TI­A­TIONS AND WORK­ING ON CON­TRACTS WITH VAR­I­OUS PLAY­ERS IN­CLUD­ING GOV­ERN­MENTS IN AFRICA, LOOK­ING TO PIN DOWN A HUGE DEAL FOR BURGER KING.”

(also else­where in Africa) in the fast­food space is the Kevin Hed­der­wick­led Fa­mous Brands, with names such as Steers, Wimpy and De­bonairs Pizza, which gen­er­ates im­mense share­holder value through fran­chis­ing and sup­ply­chain in­te­gra­tion. Adams says that at this point, how­ever, Fa­mous Brands is not the kind of com­pany that they would look to part­ner with as their busi­ness mod­els and strate­gies are com­pletely dif­fer­ent.

So ap­par­ently there aren’t a lot of ac­qui­si­tion and in­vest­ment op­por­tu­ni­ties suited to GPI’s taste of blue-chip-only brands. “Who knows?” says Ver­ster. “They could be look­ing to bring to SA another in­ter­na­tional brand, like Star­bucks.”

Hassen Adams, the chair­man of Grand Pa­rade In­vest­ments

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