Competition Tribunal approves Burger King takeover – with a trap


The Competition Tribunal has given the green light for the acquisition of Burger King South Africa (BKSA) by a private equity fund.

The licensee, Grand Parade Investments, can now proceed with the transfer of the brand to pan-African private equity firm Emerging Capital Partners (ECP) – pending all final approvals.

The deal was first denied approval in June, with the Competition Commission citing a lack of BEE credentials.

The basis for the decision was not the result of competition concerns, but the fact that “the proposed merger cannot be justified on substantial public interest grounds”.

The commission said the proposed merger would have a “substantial negative effect on promoting a greater distribution of ownership,” in particular to increase the ownership levels of historically disadvantaged people in market businesses, as predicted by the commission. ‘Section 12A (3) (e) of the Competition Act ”.

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He noted that the detention of historically disadvantaged people would drop from 68% to zero.

The GPI and ECP approached the Competition Tribunal with a set of renegotiated terms in August.

“GPI is pleased to inform shareholders that the Competition Tribunal has approved the proposed transaction on September 17, 2021,” said Grand Parade.

However, approval doesn’t come cheap. According to GPI, Burger King will have to meet several costly requirements within five years of the deal being signed. This includes:

  • Acquire investments of at least R500,000,000 in overall capital expenditure;
  • Establish at least 60 new Burger King outlets in South Africa (bring the total number of outlets in South Africa to at least 150);
  • Increase the number of permanent BKSA employees in South Africa by at least 1,250 historically disadvantaged people;
  • Increase the total value of all salaries and benefits for the 1,250 BKSA employees by at least R 120,000,000; and
  • Improved its rating for the Business and Supplier Development element in its B-BBEE dashboard.
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In addition to these conditions, Burger King South Africa will also have to establish an employee shareholding program for an effective 5% stake in BKSA, and ECP Africa Fund will have to sell Grand Foods Meat Plant.

BKSA will also have to enter into a supply agreement with Grand Foods Meat Plant and / or the buyer of Grand Foods Meat Plant.

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Grand Parade has announced its intention to sell the Burger King SA companies and meat factories in 2020, as part of the group’s strategy to focus on operations that would generate shareholder value.

The original franchise price was R670 million, but following the Covid-19 pandemic which plunged fast food chains and restaurants into crisis, Burger King SA has been revalued at R570 million, while the meat factory underwent a revaluation of R 23 million, against R 27. millions, before.

Read: Scrapping Burger King South Africa’s BEE deal will hurt future investments: industry