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Update Regarding Disposal Of Interest In Burger King (SA) RF (Pty) Ltd And Grand Foods Meat Plant (Pty) Ltd
GRAND PARADE INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1997/003548/06)
Share code: GPL
ISIN: ZAE000119814
(“GPI” or the “Company”)
UPDATE REGARDING DISPOSAL OF INTEREST IN BURGER KING (SOUTH AFRICA) RF
PROPRIETARY LIMITED AND GRAND FOODS MEAT PLANT PROPRIETARY LIMITED
1. INTRODUCTION
Shareholders are referred to the Company’s detailed terms announcement released on
SENS on 19 February 2020 (“Initial Announcement”) regarding the proposed disposal
(“Disposal”) of the Company’s shares it holds in (i) Burger King (South Africa) RF
Proprietary Limited (“BKSA”) and (ii) Grand Foods Meat Plant Proprietary Limited
(“Grand Foods Meat Plant”), to ECP Africa Fund IV LLC (“ECP”), and the announcement
released on SENS on 21 May 2020 advising shareholders that the parties are
renegotiating certain of the terms and conditions of the Disposal.
Shareholders are advised that due to disruptions caused by COVID-19, the parties have
now re-negotiated certain of the terms of the Disposal and have, on 28 July 2020 (“Offer
Signature Date”), concluded a revised binding offer (“Revised Offer”) in respect of the
Disposal.
The Disposal under the Revised Offer still entails the Company selling (i) all of the shares
it holds in BKSA, comprising 95.36% of the issued share capital of BKSA (“BKSA Sale
Shares”), and (ii) all of the shares it holds in Grand Foods Meat Plant, comprising 100%
of the issued share capital of Grand Foods Meat Plant (“Grand Foods Sale Shares”), to
ECP and will be subject to the same terms and conditions as set out in the Initial
Announcement, save as set out below.
2. CONSIDERATION
BKSA Consideration
The purchase consideration to be paid by ECP for the BKSA Sale Shares
(“BKSA Consideration”) shall be the equity value of BKSA determined below multiplied
by 95.36%. The equity value of BKSA shall be:
- based on an enterprise value of R570 million (“BKSA Enterprise Value”); and
- derived by (i) subtracting any debt or debt-like items as at Closing from the BKSA
Enterprise Value; (ii) adding back any excess cash and cash equivalents as at the date
of the Disposal following fulfilment of all Conditions Precedent (“Closing”); and (iii)
adding back debt raised by BKSA and equity capital invested by GPI in BKSA between
the Offer Signature Date and Closing shown to be specifically to fund capital
expenditure required for new store openings and on the assumption that the current
shareholder loan, the amount of which is to be determined on Closing, will be
converted to equity before Closing.
ECP shall settle the BKSA Consideration as follows:
- immediately upon Closing, 90% of the BKSA Consideration shall be paid in cash via
electronic funds transfer to bank account/s designated by GPI, as may be adjusted
downwards as set out below (“BKSA Tranche 1 Payment”);
- on the day which is 6 months after Closing, 5% of the BKSA Consideration shall be
paid in cash by electronic funds transfer to bank account/s designated by GPI, as may
be adjusted downwards as set out below (“BKSA Tranche 2 Payment”); and
- on the day which is 24 months after Closing, the remaining 5% of the
BKSA Consideration shall be paid in cash by electronic funds transfer to bank
account/s designated by GPI, as may be adjusted downwards as set out below
(“BKSA Tranche 3 Payment”).
The BKSA Tranche 1 Payment shall, on Closing, be adjusted by:
- debt and debt-like items including any similar liabilities that pre-date Closing, but which
are not accounted for in the financial statements for BKSA or any of its constituent
entities;
- full settlement of all taxes incurred due and payable up to Closing;
- survival of all assets, including tax assets, unimpaired through the Disposal excluding
impairments due to store closures; and
- any material liabilities in excess of R500 000, excluding contingent liabilities that would
need to be awarded in an actual court decision, actually due and payable arising from
claims, suits or other proceedings initiated by landlords, employees, suppliers,
customers, lenders or other stakeholders against BKSA and/or its subsidiaries or ECP
relating to the period that pre-dates the Closing shall be the exclusive responsibility of
GPI.
The BKSA Tranche 2 Payment and the BKSA Tranche 3 Payment may be reduced by the
amount of any warranty claims, including by items referred to above in excess of that recorded
at Closing.
Grand Foods Meat Plant Consideration
The purchase consideration to be paid by ECP for the Grand Foods Sale Shares ("Grand
Foods Consideration”) shall be the equity value of Grand Foods Meat Plant determined
below. The equity value of Grand Foods Meat Plant shall be:
- based on an enterprise value of R23 million (“Grand Foods Enterprise Value”); and
- derived by (i) subtracting any debt or debt-like items as at Closing from the Grand
Foods Enterprise Value and (ii) adding back any excess cash and cash equivalents as
at Closing and on the assumption that the current shareholder loan, the amount of
which is to be determined on Closing, will be converted to equity before Closing.
ECP shall settle the Grand Foods Consideration as follows:
- immediately upon Closing, 90% of the Grand Foods Consideration shall be paid in
cash by electronic funds transfer to bank account/s designated by GPI, as may be
adjusted downwards as set out below (“Grand Foods Tranche 1 Payment”);
- on the day which is 6 months after Closing, 5% of the Grand Foods Consideration shall
be paid in cash by electronic funds transfer to bank account/s designated by GPI, as
may be adjusted downwards as set out below (“Grand Foods Tranche 2 Payment”);
and
- on the day which is 24 months after Closing, the remaining 5% of the Grand
Foods Consideration shall be paid in cash by electronic funds transfer to bank
account/s designated by GPI, as may be adjusted downwards as set out below
(“Grand Foods Tranche 3 Payment”).
The Grand Foods Tranche 1 Payment shall, on Closing, be adjusted by:
- debt and debt-like items including any similar liabilities that pre-date Closing, but which
are not accounted for in the financial statements for Grand Foods Meat Plant or any of
its constituent entities;
- full settlement of all taxes incurred due and payable up to Closing; and
- any material liabilities in excess of R500 000, excluding contingent liabilities that would
need to be awarded in a binding court decision, actually due and payable arising from
claims, suits or other proceedings initiated by landlords, employees, suppliers,
customers, lenders or other stakeholders against Grand Foods and/or its subsidiaries
or ECP relating to the period that pre-dates Closing, shall be the exclusive
responsibility of GPI.
The Grand Foods Tranche 2 Payment and the Grand Foods Tranche 3 Payment may be
reduced by the amount of any warranty claims, including by items referred to above in
excess of that recorded at Closing.
3. CONDITIONS PRECEDENT
The Disposal is subject to the fulfilment of the following outstanding conditions precedent
(“Conditions Precedent”):
- by not later than 30 November 2020, or such later date agreed between the parties,
the conclusion of a share purchase agreement (“SPA”) and any other documents
deemed relevant, including such provisions that are customary to transactions that are
in the nature of the Disposal;
- the conversion of all shareholder loan claims that GPI may have against BKSA and
Grand Foods Meat Plant into equity;
- the execution by relevant key persons of new employment agreements with BKSA;
- the receipt of a capacity, authority and enforceability opinion from GPI’s legal counsel
addressed to BKSA and to ECP in form and substance satisfactory to ECP;
- the receipt of all requisite corporate, shareholder, third party, franchisor, government
and regulatory approvals as agreed between the parties including any necessary
approvals from the JSE Limited and the South African competition authorities;
- the notification to and receipt of any waivers and/or approvals from any required parties
resulting from the proposed investment;
- the waiver from an affiliate of Burger King Corporation of the historical breach(es) of
the Burger King master franchise and development agreement (“MFDA”);
- agreement between ECP and Restaurant Brands International on a revised
MFDA; and
- the acquisition by ECP of the immovable property on which the Grand Foods Meat
Plant is operated on, or, alternatively, the conclusion of a minimum 5-year lease, on
terms to be agreed that are customary for such transactions.
4. WARRANTIES AND OTHER SIGNIFICANT TERMS OF THE DISPOSAL
As security for ECP’s obligations in respect of the BKSA Tranche 2 Payment and the
BKSA Tranche 3 Payment, ECP shall deliver and pledge in securitatem debiti (and not
out and out) to GPI, a first priority, fully executed share pledge in respect of such number
of shares constituting 10% of the BKSA Sales Shares. On payment of the BKSA Tranche
2 Payment, GPI shall release 5% of such pledged shares. On payment of the BKSA
Tranche 3 Payment, GPI shall release the remaining 5% of such pledged shares. Should
there be any adjustment to the BKSA Consideration, then a proportionate number of the
pledged shares shall be released.
As security for ECP’s obligations in respect the Grand Foods Tranche 2 Payment and the
Grand Foods Tranche 3 Payment, ECP shall deliver and pledge in securitatem debiti (and
not out and out) to GPI, a first priority, fully executed share pledge in respect of such
number of shares constituting 10% of the Grand Foods Sale Shares. On payment of the
Grand Foods Tranche 2 Payment, GPI shall release 5% of such pledged shares. On
payment of the Grand Foods Tranche 3 Payment, GPI shall release the remaining 5% of
such pledged shares. Should there be any adjustment to the Grand Foods Consideration,
then a proportionate number of the pledged shares shall be released.
GPI has provided ECP with an exclusive right to purchase the immovable property on
which the Grand Foods Meat Plant meat plant is situated for a price of not more than
R22 000 000.
The Revised Offer further contains representations and warranties by the Company in
favour of ECP which are standard for a transaction of this nature.
GPI has provided ECP with exclusivity. Should GPI attempt to enter into a similar
transaction with a third party in breach of their exclusivity undertaking, GPI shall be liable
for a break fee as well as injunctive relief.
5. CIRCULAR
A circular containing the full details of the Disposal, incorporating a notice convening the
required general meeting of the shareholders of the Company, will be distributed to
shareholders in due course, at which time the salient dates and times of the Disposal,
including the date of the general meeting, will be announced on SENS.
Cape Town
29 July 2020
Sponsor and Corporate Advisor
PSG Capital
Legal Advisors
Cliffe Dekker Hofmeyr
Date: 29-07-2020 09:45:00
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