Grand Parade Investments (GPI), which owns the master franchise agreement for Burger King in SA, is mulling over selling down its stake in restaurant franchisor Spur Corporation.
GPI, which trades at an enormous discount to its 650c a share net asset value, has been facing calls from shareholders to unlock value. The company has also experienced an exodus of top executives in the past year, including the CEO and finance director in recent weeks.
Speaking to Business Day on Friday, GPI acting CEO Hassen Adams said consideration was being given to selling off a portion of its 18.5% stake in Spur to raise proceeds that could be reinvested in growing the footprint of fast-food brand Burger King and Dunkin’ Donuts.
GPI also holds the Baskin Robbins ice-cream parlour master franchise for SA, but the roll-out of stores appears to have been put on ice with rumours that this could be sold in the short term.
At Spur’s ruling price, GPI’s stake is worth more than R490m. But Adams stressed GPI would aim to retain its original 10% empowerment shareholding in Spur and only sell Spur shares acquired on the open market.
The talk of a sale is a turnabout from GPI’s apparent determination to build a stake in Spur. In the second half of 2017, GPI was still buying up large parcels of shares in the steakhouse group. There was also an attempt in late 2016 to acquire Coronation Fund Manager’s large stake in Spur, but this was abandoned. Market speculation had suggested that GPI would aim to reverse Burger King into Spur in exchange for a controlling stake in Spur, but Adams said market suggestions that GPI was aiming to take over Spur were misplaced. "We simply bought into Spur as a growth opportunity," he said.
Burger King, which opened 21 stores over the past year, was set to deliver good returns, thanks to continuing efforts by a new management team, Adams said. "By the end of the financial year, there will be evidence of a fatter margin at Burger King with our new store applications kicking through," he said.
Burger King was certain of achieving its target number of 80 stores by the end of June.
"If we grow at five stores every year going forward, then we don’t need additional capital. But if we decide to be more aggressive and open 25 stores a year, then we will need more funding," he said.
In terms of capital, a proposed R225m sale of its head office in central Cape Town recently fell through.
Adams said GPI intended hanging on to its gaming investments. These comprise a 15% stake in Sun International-controlled SunWest, which owns the money-spinning GrandWest casino in Cape Town and the smaller Golden Valley casino in Worcester, as well as a 30% stake in GrandSlots, a limited-payout machine operator.
Adams said that GPI could still play an active role in the gaming sector. He said that the group was working on proposals to take advantage of a possible second casino licence in Cape Town.
The second casino licence entails transferring an existing licence located in the Western Cape to the Cape Town metropole. The four licences outside Cape Town are those for the Garden Route Casino, the Caledon Casino, the Mykonos Casino — which all belong to Tsogo Sun — and the Golden Valley Casino.