Grand Parade Investments (GPI) says that it is renegotiating the disposal of its shares in the Burger King franchise due to the ongoing coronavirus pandemic.
In a shareholder statement on Thursday (21 May), the group said that the parties involved are renegotiating the terms and conditions of the disposal and that shareholders will be updated if renegotiations are successful.
In February, GPI said that it will sell all of the shares it holds in Burger King South Africa – being 95.36% – to ECP Africa Fund as part of an ongoing restructuring process. The deal also included all of the shares it holds in Grand Foods Meat Plant.
Prior to the nationwide lockdown, Burger King reported a challenging operating environment, but talked up its successes and turn to profitability despite this. However, under the lockdown, which has now been in effect at high levels for eight weeks, the quick service restaurant has not been able to operate at full capacity.
At the start of May 2020, restaurants were allowed to open for delivery only – however, due to the “poor financial viability of only offering a home delivery service”, only a limited number of Burger King outlets provided the service.
The purchase price for Burger King was previously reported to be based on an enterprise value of R670 million, and R27 million for Grand Foods Meat Plant.
The move to sell the business was part of GPI’s plans to focus on operations that could unlock value for shareholders.
“Over the last 2 years management has undergone a process of restructuring the business with the main aim of reducing the discount to iNAV (indicative net asset value). This process involved discontinuing loss making business and improving the profitability of its operational food and manufacturing businesses.
“The restructure resulted in a vast improvement in profitability which assisted in reducing the discount,” it said by way of rationale for the deal.
In March last year, GPI said that it would close its Dunkin Donuts and Baskin Robbins branches in South Africa which counted losses over R70 million.
The group said that it tried to find interested parties to buy the brands, but noted that it got no serious offers in the allotted period, leading to the businesses being liquidated.
“Dunkin’ Donuts and Baskin-Robbins continued to experience a challenging six months with the second quarter having the most significant impact on trading. The Group decided to exit these brands based on the continued poor performance and a sustained period of losses.
“The exit of Dunkin’ Donuts and Baskin-Robbins is the first step of a broader strategy to revert back to an investment holding company,” it said.