Grand Parade Investments sells its 10 percent shareholding in Spur Corporation

The operator of Burger King in South Africa wants to pay down debt.

Grand Parade Investments (GPI), which runs the Burger King chain of fast-food restaurants in South Africa, has sold its 10 percent stake in Spur Corporation back to the steakhouse company.

The disposal of the shares frees GPI up to focus on its Burger King franchise, which faces intense competition in South Africa for a share of consumers wallets at a time when the economy and consumer spending is in the doldrums.

GPI has been struggling to make a success of its international food franchises and in February this year liquidated its loss-making Dunkin’ and Baskin-Robbins outlets.

In 2014 Spur sold 10.8-million, or 10 percent, of its shares to the black empowerment firm GPI for R294.7 million in a deal that included a five-year “lock-in period” to end-October 2019.

On Thursday, GPI said it would dispose of 10.8 million shares in Spur in a share buy-back deal worth R260.4 million.

GPI said it would use the proceeds to reduce debt in order to improve profitability and cash generation.

GPI indicated in March 2019 that it was looking to sell its Spur stake and invest the proceeds in its Burger King business. At the time, the business recorded positive results.

But in March 2019, the South Africa Burger King business pencilled in a headline loss 66 percent to R9.5 million in the six months ended December 2018.

The Spur share sale aligns with the company’s strategy to “unlock value and create sustainability for all stakeholders”, GPI said.

In a separate statement, Spur said it wanted to buy the shares back as it did not want GPI to be able to freely trade them. It would pay R24 a share, a premium to Wednesday’s closing price. Its shares were last traded at R22.39. 

“Spur has a sizeable cash balance with no immediate material investment opportunity that meets the investment criteria of its board,” it said.

“It is envisaged that the utilisation of its cash resources to implement the GPI repurchase will be beneficial to existing shareholders of the company, as it will enhance the company’s earnings, return on equity and future dividends.”