Cape Town, South Africa, February 20, 2020//-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.
Since last summer, however, JJ liataud has carefully expanded its menu, rolling out its 16-inch Giant size (double the size of its original sandwich) and introducing a new 9-Grain Wheat sub. The company also added new condiments: sliced pickles and a Kickin’ Ranch sauce made daily with fresh buttermilk, puréed hot cherry peppers, and seasonings. And earlier this year, Jimmy John’s unveiled its first-ever grab-and-go sandwich, the 13-inch, Parisian-inspired Frenchie, to inject even more convenience and speed into the operation. In a clever marketing play that captured headlines, Jimmy John’s followed up The Frenchie’s launch with a $30 limited-release pinot noir designed to pair with the salami, capicola, and provolone sandwich.
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, Jimmy John Founder 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.”
African Eye Report
