Grand Parade to shed Burger King
Gaming counter to maintain minority interest in line with its strategy to become a pure investment company
Grand Parade Investments (GPI), the master franchise holder for Burger King in SA, is in talks with an unnamed buyer to offload a majority stake in the local operations of the US fastfood chain it bought for more than R700m.
Grand Parade Investments (GPI), the master franchise holder for Burger King in SA, is in talks with an unnamed buyer to offload a majority stake in the local operations of the US fastfood chain it bought for more than R700m.
The leisure and gaming company, which also announced on Tuesday that founder and longstanding chair Hassen Adams will step down at the end of January 2020, has indicated previously that it is looking to reduce its interest in Burger King so that it would not hold an operational stake anymore.
GPI, which opened the first Burger King outlet in SA in 2013, has endured several years of underperformance from the fast-food chain, which reported its first profit in the 2019 financial year.
Adams said in an interview the mooted sale would reduce GPI’s stake in Burger King from 96% to “a nonoperational minority interest” in line with the group’s strategy to become a pure investment company.
“There are people we are talking to regarding Burger King. We want to maintain a minority interest. Burger King is a big business to run. We are approaching 100 stores now. There is nothing finalised yet because there is no binding offer on the table,” he said.
The intended sale of a stake in Burger King follows GPI’s sale of its 30% interest in Sun Slots to Sun International for R504m. “Now that shareholders have voted for the Sun Slots deal, GPI will move to restructure its balance sheet by reducing debt, which will allow the company to revert to being dividend active,” Adams said.
The company, which has a market capitalisation of R1.78bn, has debt of R300m.
In February, GPI announced its decision to voluntarily liquidate the SA operations of US doughnut brand Dunkin Donuts and ice cream and cake speciality shop Baskin-Robbins due to poor performance.
GPI said on Tuesday that Adams has resigned as nonexecutive chair and will leave at the end of January 2020. This brings to an end Adams’s time at the helm of the investment company he founded in 1997.
“I have had health issues recently. I feel I have done my duty and there are other things I would rather do. For instance, I want to spend more time at my farms.” He owns two farms one in Hermanus and the other on the west coast.
“That is what I want to do. It is time to say goodbye.”
Adams, who is 67, leaves amid allegations of discontent among shareholders about the direction of the company.
There had been dissent at GPI over the company’s decision to invest in food assets, independent analyst Anthony Clark said on Tuesday.
“For many years GPI was trading at a significant discount to its net asset value because the market was disenchanted with the fact that they were recycling shareholders’ money from gaming profits into areas in which they had no understanding and in which they had to earn their school fees because it would be years of losses before they gained market share,” Clark said.
He cited Burger King, which he said had taken too long to become profitable. GPI had to write down the value of Dunkin Donuts and Baskin-Robbins for R100m.
Sam Sithole, CEO of Value Capital Partners, which owns about 20% of GPI, said the company enjoyed a good relationship with Adams. “He has always been very helpful and shared the strategy with us,” Sithole said.
GPI’s share price gained 1.06% on Tuesday. The stock is up 21.41% since the beginning of 2019.