The Competition Commission has blocked the proposed acquisition of Burger King South Africa by private equity fund, ECP Africa, on the basis that BEE shareholding in the company would drop to 0%.
ECP Africa – which comprises several different funds – intended to acquire Burger King SA and Grand Foods Meat Plant from Grand Parade Investments.
However, the commission found that the merger would lead to a significant reduction in the shareholding of historically disadvantaged persons (HDPs) in the target firm, from more than 68% to 0%.
“The commission found that the proposed transaction is unlikely to result in a substantial prevention or lessening of competition in any relevant markets,” it said.
However, with respect to public interest considerations, the commission found that Grand Parade was ultimately controlled by an empowerment entity wherein historically disadvantaged persons hold an ownership stake of more than 68%, compared to the acquiring firm which has no ownership by these groups.
“Thus, as a direct result of the proposed merger, the merged entity will have no ownership by HDPs and workers.
“The Commission is therefore concerned that the proposed merger will have a substantial negative effect on the promotion of greater spread of ownership, in particular to increase the levels of ownership by historically disadvantaged persons in firms in the market as contemplated in section 12A(3)(e) of the Competition Act.
“The proposed merger cannot be justified on substantial public interest grounds,” it said.
Grand Parade announced plans to sell the Burger King SA and meat plant companies in 2020, as part of the group’s strategy to focus on operations that would unlock value for shareholders.
The initial price for the franchise was R670 million, but following the Covid-19 pandemic which sent fast food chains and restaurants into crisis, Burger King SA was revalued at R570 million, while the meat plant carried a revaluation of R23 million, down from R27 million, before.
— CompComSA (@CompComSA) June 1, 2021