The purchase price for Burger King is based on an enterprise value of R670m, and R27m for Grand Foods Meat Plant.
GPI acquired the master franchise for the Burger King brand in 2012, and since then the franchise has grown to comprise more than 90 restaurants across the country. BKSA turnover exceeded R1bn in 2019 and for the first time since opening, contributed positively to GPI’s headline earnings.
BKSA sources more than 90% of its ingredients from local suppliers including the Whopper patty, produced by the burger production facility Grand Food Meat Plant.
The deal is part of the company's plan to embark on a 'value unlock strategy' through the controlled sale of assets, with the Burger King sale representing the first phase of this strategy. GPI says it will use the proceeds of the BKSA sale to pay a special dividend to shareholders.
Commenting on the sale, GPI CEO Mohsin Tajbhai said, “Our focus last year was to restructure the business and to improve the profitability of our operational food businesses, which we succeeded in doing. At the same time, we took a strategic decision to reduce our operational involvement in BKSA and solicited from various interested firms. The offer we received from ECP was the highest bid we received and exceeded an independent valuation done on the business. Based on this, the board felt that it was necessary to recommend the offer from ECP.
"We are proud of what we have built in this incredible brand in South Africa, and are excited to hand the baton to ECP, who are experienced investors in the African restaurant and consumer space.”
The consumer sector is one of ECP’s largest sectors by number of investments, with ECP having completed 12 transactions in the sector. From 2012 to 2017, ECP played an instrumental role in guiding Java House’s growth from 12 stores at investment, into a leading East African restaurant group operating 59 restaurants across three countries at exit.
Following the completed sale of Java House, ECP invested in Artcaffé Group, a leading Kenyan restaurant and café operator, in December 2018. Since ECP’s investment, Artcaffé Group has grown its store footprint by more than 30% within one year.
Paul Maasdorp, managing director and partner at ECP, commented, "BKSA employs more than 2,800 people today, which we would seek to more than double over the course of ECP’s investment. Our goal is to bring Burger King’s delicious and affordable flame-grilled burgers closer to the consumer. From our first fund where Nelson Mandela chaired our advisory committee, South Africa has, and continues to be, an important market to us."
Chairman of the BKSA, Hassen Adams reflected on how the Burger King brand was introduced to South Africa. “As the founder that introduced Burger King to GPI and South Africa, the journey for me in Burger King was certainly a memorable experience in the Quick Service Restaurant market. It is a sad moment for us to hand over years of hard work. I am, however, very confident that ECP will make an even bigger success of BKSA during the next few years.
"What is even more satisfying is that an aggressive rollout of stores by ECP will create a lot more job opportunities within South Africa. This is exactly what GPI has always achieved in creating opportunities and leveraging these opportunities successfully. This in itself has created huge employment which is what South Africa needs, together with a long-awaited dividend for our patient shareholders.”
