Authorities approve Burger King sale

The competition authorities have finally approved Grand Foods Investments and Grand Foods Proprietary’s sale of their shares in Burger King South Africa (BKSA) and Grand Foods Meat Plant to Emerging Capital Partners (ECP) Africa Fund. The sale, approved on September 17, came with a list of conditions aimed at boosting South Africa’s economy.

The sale was announced in a Sens statement released by parent company Grand Parade Investments (GPI) on Tuesday morning. GPI did not indicate the updated value of the acquisition but stated in a previous Sens statement that the sale of Burger King to ECP “would result in a foreign direct investment into South Africa and payment of up to R498 million to GPI.”

The deal that keeps on giving

The Competition Tribunal approved the transaction with a list of conditions that the new franchise owners need to meet within the next five years.

The most noteworthy is that Burger King – under its new owners – is expected to procure investment worth no less than R500 million in aggregate capital expenditure.

BKSA is also expected to open 60 new stores in the country and permanently employ 1 250 historically disadvantaged people.

The tribunal further ruled that BKSA should increase the total value of all payroll and employee benefits of the new employees by at least R120 million. ECP Africa Fund is also expected to improve the American burger chain’s rating for the Enterprise and Supplier Development element on its BBBEE scorecard.

Second time’s the charm?

GPI first announced intentions to dispose of its interests in BKSA in February 2020, but the fact that ECP is an American private equity firm – focused on investing in Africa – did not count in the deals favour.

The deal was met with resistance by competition authorities who raised concerns that the initial deal was not uplifting previously disadvantaged persons, subsequently blocking the acquisition attempt.

The new deal addresses the authorities’ concerns as Burger King will now, on top of the above listed conditions, establish an employee share ownership programme.

In what seems to be an effort to minimise ECP’s monopoly, the tribunal expects the buyers of Burger King to sell Grand Foods Meat Plant – which supplies patties to the fast food chain. Burger King SA will instead have a supply agreement with the new owners of Grand Foods Meat Plant.

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