ECP SIGNS OFFER TO ACQUIRE BURGER KING SOUTH AFRICA FROM GPI
Emerging Capital Partners (ECP), a leading African private equity firm, has signed a binding offer with Grand Parade Investments (GPI) to acquire Burger King South Africa.
Listed empowerment group Grand Parade Investments (GPI) has entered into an agreement to sell 100% of its interest in Burger King South Africa (BKSA) and Grand Foods Meat Plant to Emerging Capital Partners (ECP), one of Africa’s largest private equity groups with over $3.2bn in funds raised. The deal is a category 1 transaction and is subject to regulatory approval and several conditions precedent. The valuation of Burger King is R670m enterprise value (EV), subject to any adjustment, which equates to a 12 times historical EBITDA (FY2019), and approximately 8 times forward EBITDA (FY2020). The valuation of Grand Foods Meat Plant is R27m enterprise value.
The BURGER KING® brand has grown to become one of the largest and fastest growing restaurant chains in South Africa with more than 90 restaurants across the country. GPI acquired the Master Franchise for the Burger King brand in 2012. BKSA has performed extremely well over the last two years, exceeding R1bn in turnover in 2019 and for the first time- since opening- contributed positively to GPI’s headline earnings. Under the guidance of Grand Parade Investments, BKSA has achieved impressive growth since its launch in 2013 and is well positioned to continue serving the needs of South African consumers. BKSA has been recognised as the industry winner in service excellence for three years in a row in the Ask Afrika Orange Index.
BKSA sources more than 90% of its ingredients from local suppliers including the Whopper® patty, produced by the Grand Food Meat Plant, a GPI owned burger production plant.
“BKSA focuses on its food superiority with quality burgers and excellent customer service delivery by a team working hard to ensure it caters to and meets the needs of the South African market. 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”, said Paul Maasdorp, Managing Director and Partner at ECP.
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.
Juan Klopper, COO of BKSA, said, “GPI launched the Burger King brand in South Africa in 2013, and with the assistance of management have grown Burger King into one of the most loved restaurant brands in South Africa. The executive management team of BK wish to thank GPI for their guidance and support over the years, and we are excited to partner with ECP and to bring this brand closer to more customers.”
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.”
“I wish to thank all of the staff and management of BKSA for their support and wish them well in continuing to grow the Burger King brand successfully.”
Emerging Capital Partners (ECP)
ECP draws on over 20 years of private equity investing experience in Africa and has completed over 60 transactions and nearly 50 full exits. It has raised over $3.2 billion in growth capital through funds and co-investment vehicles. ECP seeks to identify opportunities that will benefit from the fundamental, long-term structural demographic and economic shifts driving Africa’s growth. ECP seeks to work closely with investees to implement best practices and strengthen business leadership. Its presence spreads across three offices in Africa’s major hub economies.
ECP currently has two other investments – both in the fintech sector – with a significant presence in South Africa. ECP is an investor in Mukuru, one of the largest, if not the largest, remittance company in Southern Africa. ECP also recently invested in Inter Africa Transport Forex (IATF), a tech logistics company that enables its customers – transport companies, especially cross-border ones – to better procure, manage and track their costs. Currently ECP’s portfolio companies employ more than 700 people in South Africa and ECP is actively looking at other potential investments in the country. ECP’s investments have also included the foreign subsidiaries of South African companies, such as the Ivorian subsidiary of the MTN Group, and ECP is currently invested alongside MTN Group in IHS Towers, the largest tower company in Africa.
Grand Parade Investments (GPI)
GPI is an established empowerment company, with holdings in the food and gaming sectors. The Company was founded in 1997 and has an established track record of creating value for its beneficiaries, including thousands of ordinary shareholders from the marginalized communities in Cape Town’s historically disadvantaged areas. GPI listed on the main board of the JSE in 2008 and since then grew its gaming investment portfolio. More recently, GPI has been instrumental in the launch and growth of Burger King® in South Africa.
Every day more than 11 million guests visit Burger King Restaurants around the world, and they do so because of the high-quality, great-tasting, and affordable food. Founded in 1954, Burger King is the second largest fast food hamburger chain in the world. The original Home of the Whopper, Burger King’s commitment to premium ingredients, signature recipes, and family-friendly dining experiences is what has defined the brand for more than 50 years.
Burger King South Africa
The very first Burger King restaurant in South Africa opened its doors in May 2013. A joint venture between Western Cape-based Company, Grand Parade Investments, and an affiliate of Restaurant Brands International Inc. BKSA was launched in the Western Cape and has since expanded nationally to more than 90 locations across the country.
Restaurant Brands International (RBI)
RBI is one of the world’s largest quick service restaurant companies with more than $32 billion in system-wide sales and approximately 26,000 restaurants in more than 100 countries. RBI owns three of the worlds most prominent and iconic quick service restaurant brands – Burger King®, TIM HORTONS®, and POPEYES®. These independently operated brands have been serving their respective guests, franchisees and communities for decades.
Note: GPI is currently in a closed period and will provide more information on the sale of BKSA and the new investment plans when its results are issued in late March 2020.
Emerging Capital Partners [ECP]
+1 202 706 7875
Grand Parade Investments (GPI)
+27 (0) 21 426 1233
+27 (0) 83 460 3910