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FAMOUS BRANDS LIMITED - Announcement regarding the acquisition by Famous Brands Limited of GBK Restaurants Limited

Release Date: 01/09/2016 07:05
Code(s): FBR     PDF:  
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Announcement regarding the acquisition by Famous Brands Limited of GBK Restaurants Limited

Famous Brands Limited
(Registration number 1969/004875/06)
JSE share code: FBR
ISIN: ZAE000053328
(“Famous Brands” or “Company”)


ANNOUNCEMENT REGARDING THE ACQUISITION BY FAMOUS BRANDS OF
GBK    RESTAURANTS LIMITED AND WITHDRAWAL OF CAUTIONARY
ANNOUNCEMENT


1. INTRODUCTION

   The board of directors of Famous Brands (“the Board”) is pleased to announce
   that it has concluded an agreement (“the Sale and Purchase Agreement”) to
   acquire the entire issued share capital of GBK Restaurants Limited (“Gourmet
   Burger Kitchen” or “GBK”) for a total enterprise value consideration of £120
   million (approximately ZAR2.1 billion*) (“the Purchase Consideration”), subject to
   the fulfilment of the condition precedent set out in paragraph 4.3 below (“the
   Acquisition").

   Gourmet Burger Kitchen is the pioneer of the premium burger category in the
   United Kingdom (“UK”).

  *Converted at the GBP/ZAR exchange rate of 17.537, being the hedged exchange
   rate at which the Acquisition is expected to be concluded.

2. OVERVIEW OF GBK


  GBK was founded in 2001 and is the market leading premium burger restaurant
  chain in the UK. GBK operates a differentiated, flexible Fast Casual model which
  enables it to cater for a variety of meal times and occasions and a wide range of
  customers.
                                                                           
  Since launching in 2001, GBK has expanded primarily in the UK and Ireland. In
  the UK, GBK is represented by 75 company-owned restaurants offering eat-in and
  take-away service and online delivery. GBK also has a retail offering whereby
  GBK-branded food products (manufactured by a third party) are sold into retail
  channels. GBK recently re-acquired the rights to the Irish franchise network
  thereby adding five stores to its portfolio.

  GBK is 97% held by Yellowwoods Group, with the balance (3%) held by
  management.

  Alasdair Murdoch, CEO of Gourmet Burger Kitchen, said: “GBK has grown
  rapidly, and has had consecutive years of like-for-like sales growth, based on
  fantastic restaurant teams and critically, a continuous journey towards excellence
  in our food. We’re delighted to move onto the next phase of growth with Famous
  Brands. As part of the Group our aims will remain the same: to continue opening
  10-15 restaurants a year in the UK, continually elevate our food, and look at other
  growth opportunities.”

3. RATIONALE FOR THE ACQUISITION

  Famous Brands has identified the UK as a strategic growth region in Europe and
  one which offers the opportunity to earn hard currency outside of Africa. The
  Acquisition represents an important step in Famous Brands’ expansion strategy.
  GBK is Famous Brands’ largest acquisition to date. This Acquisition will add scale
  to Famous Brands’ UK business which includes Wimpy UK, and up-weight the
  Group’s premium brand portfolio.

  GBK presents a strong investment case:
  -   Market leader in the premium burger segment in the UK;
  -   Unique asset of substantial scale with a defined and verifiable prospective
      store roll-out;
  -   The business has delivered sustained industry leading like–for–like growth;
  -   Experienced management team, with in-depth industry knowledge and
      proponents of best practices; and
  -   Increased diversification of earnings base.

Kevin Hedderwick, Famous Brands’ Group Strategic Advisor responsible for M&A
activity said, “This acquisition will transform the future of Famous Brands. GBK is a
best in class business and brand, with growing consumer equity, supported by a
phenomenal leadership team. I am confident that the addition of GBK to our portfolio
positions the Group optimally to attain its audacious future growth targets.”

4. PRINCIPAL TERMS AND CONDITIONS OF THE ACQUISITION

    4.1    Purchase Consideration and Acquisition funding

           Famous Brands will acquire the entire issued share capital of GBK for an
           enterprise value consideration of £120 million.

           Famous Brands intends to fund the Purchase Consideration plus
           transaction expenses by way of cash accumulated by Famous Brands
           from its business operations and, to the extent required, short term
           funding.

    4.2    Management retention

           GBK’s management team has extensive industry experience in the food
           and beverage market in the UK, gained with major global food brands
           including KFC, Pizza Hut, Pizza Express and others. The incumbent
           management team is key to the success of the future of the business and
           will be retained.

   4.3    Condition precedent and effective date

          The Acquisition will be subject to the approval of the Financial
          Surveillance Department of the South African Reserve Bank. The effective
          date will be the later of the second business day after the date on which
          this condition has been fulfilled, and 25 business days after the date of the
          Sale and Purchase Agreement.

5. FINANCIAL INFORMATION

  As at the signature date of the Sale and Purchase Agreement, for the prior
  12 months ended 30 June 2016, GBK’s earnings before interest tax depreciation
  and amortisation was approximately £9.6 million, and its net asset value was
  £14.4 million, of which 100% is attributable to Famous Brands.

6. CATEGORISATION

  The Acquisition is classified as a Category 2 transaction for Famous Brands in
  terms of the Listings Requirements of the JSE Limited (“Listings Requirements”).

  Following the implementation of the Acquisition, GBK will become a subsidiary of
  Famous Brands. Accordingly, Famous Brands confirms that GBK’s constitutional
  documents enable Famous Brands to continue to comply with its obligations in
  terms of the Listings Requirements.

7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

  Shareholders are referred to the cautionary announcement dated 12 August
  2016. Further to the information as set out in this announcement, shareholders
  are advised that they no longer need to exercise caution when dealing in the
  Company’s securities.


Midrand
1 September 2016

Financial Adviser, Sole Underwriter and Transaction Sponsor
The Standard Bank of South Africa Limited

United Kingdom Accounting Advisers
Rees Pollock

United Kingdom Legal Counsel
Bircham Dyson Bell LLP

South African Legal & Tax Counsel
Webber Wentzel

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