Spurred on

Finweek English Edition - - INVESTMENT -

The re­cent de­ci­sion by Spur to se­cure Grand Pa­rade In­vest­ments (GPI) as it s BEE share­holder presents a fas­ci­nat­ing de­ci­sion for both com­pa­nies. The two com­pa­nies looked pit­ted to be se­ri­ous con­tenders in the food space with GPI in the midst of launch­ing the Burger King brand in South Africa. So, while GPI could cer­tainly ben­e­fit from the ex­pe­ri­ence and knowl­edge of Spur, what’s in it for Spur share­hold­ers?

Spur CEO Pierre van Ton­der, ex­plains the ra­tio­nale: “We have made a strate­gic de­ci­sion to f in­alise a BEE trans­ac­tion in order to im­prove our BEE score­card as this will ben­e­fit the group go­ing for­ward in terms of se­cur­ing li­cences and sites. Our in­ten­tion was to source a BEE part­ner who would add value to the Group. We felt Grand Pa­rade In­vest­ment was the most nat­u­ral f it, con­sid­er­ing their strat­egy for the next five to 10 years.”

The trans­ac­tion will en­tail Spur is­su­ing 10.8m new shares to GPI at an ef­fec­tive price of R27.16/share. This trans­lates to an ap­prox­i­mate 10% dis­count to the rul­ing price of Spur prior to the an­nounce­ment, but there will be a lock-in pe­riod of f ive years. Of the to­tal con­sid­er­a­tion of R295m, R150m will be funded by way of a Stan­dard Bank pref­er­ence share struc­ture in the BEE com­pany, R72.3m will be funded by Spur and GPI will in­vest R72.3m in cash. The trans­ac­tion will re­sult in a net cash inf low of R222.3m to Spur. GPI will have the right to ap­point a direc­tor to the Spur board.

So how does this pan out for the com­pet­i­tive dy­nam­ics be­tween the two com­pa­nies? GPI, through Burger King, will com­pete di­rectly with Spur while at the same time it will have a sub­stan­tial in­vest­ment in the busi­ness.

As per the Sens an­nounce­ment: “The di­rec­tors of Spur be­lieve that GPI is a true com­mer­cial part­ner in ad­di­tion to be­ing a BEE share­holder.” Van Ton­der says that there al­ready ap­pears to be ob­vi­ous syn­er­gies. “They have pur­chased a 65% stake in Mac Broth­ers [a cater­ing equip­ment man­u­fac­turer] from whom we source equip­ment. In prod­uct in­no­va­tion, we have just in­vested R38m into a rib fac­tory in Jo­han­nes­burg which will come on­line to­wards t he end of the year and they are look­ing at mak­ing a s i mi­lar Cents 3 600

3 400

3 200

3 000

2 800

2 600

Sep 2013 in­vest­ment. So we think there are syn­er­gies that can be ex­plored.”

Van Ton­der be­lieves the two com­pa­nies are com­pet­ing in a grow­ing mar­ket. “We think there will be value putting the two com­pa­nies on the same plat­form. This will start with the back­end of both busi­nesses – look­ing for scale and to see where the eco­nom­ics make sense. With a GPI direc­tor on the Spur board, we will have ex­ec­u­tive com­mit­tee meet­ings ev­ery quar­ter and dis­cuss strat­egy, but when a busi­ness op­por­tu­nity presents it­self, we will move im­me­di­ately.” While there are ob­vi­ous dis­ad­van­tages with hav­ing a com­peti­tor so close to one’s cards, there may be some tan­gi­ble ben­e­fits that will ac­crue to Spur share­hold­ers. war­ren­dick7@

gmail.com

Spur CEO Pierre van Ton­der

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