GPI sells Burger King to ECP Africa for R697m

GRAND Parade Investments (GPI) said it would sell its 95.36% stake in the Burger King franchise and all of Grand Foods Meat Plant to ECP Africa Fund for R697 million.

The investment firm signed a long-term master franchise agreement with Burger King in 2012, betting on South Africa’s lucrative fast food market, consumer appetite for flame-grilled burgers and their price appeal.

However, South African retailers have been struggling to boost sales as a slowing economy, high unemployment rate and rising fuel costs reduced consumers’ spending power.

GPI traded at a significant discount to the value of its underlying assets, chief executive Mohsin Tajbhai said, adding that the South African firm implemented a “value-based strategy” two years ago, aimed at reducing the discount at which the group’s share price trades relative to its intrinsic net asset value.

“The board considered the sale of GPI’s stake in Burger King South Africa in the context of the group’s strategy of unlocking value for all shareholders and has decided that the best way forward is to initiate a controlled sale of assets,” Tajbhai said.

The Whopper Burger maker, which launched its restaurant in Cape Town in 2013, competes with market leader McDonald’s Corp and other restaurant chains such as RocoMamas.

Burger King, which has 92 restaurants across the country, generated a profit of R11.7m for GPI last year, aided by higher sales from new restaurants and improving same-store sales.

Grand Foods Meat Plant operates a burger-making plant, with Burger King being its largest customer, accounting for more than 90% sales.

Meanwhile, ECP Africa, a private equity fund manager focused on Africa, has 60 investments that include Eco bank, MTN Ivory Coast and leading bottler of carbonated soft drinks, Atlas Bottling Corp in Algeria. |