African PE firm ECP seals takeover deal for Burger King South Africa

 African PE firm ECP seals takeover deal for Burger King South Africa

Private equity firm Emerging Capital Partners (ECP) has sealed a deal to buy Burger King’s operations in South Africa from Grand Parade Investments Ltd after hitting an antitrust roadblock.

Johannesburg Stock Exchange-listed Grand Parade owns Burger King South Africa Proprietary Ltd (BKSA) and Grand Foods Meat Plant Proprietary Ltd. Grand Parade is an investment holding firm that has interests in the food and gaming business while Grand Foods sells most of its products to Burger King.

The company said that all conditions required to be fulfilled or waived prior to the closing date of the deal have been fulfilled or waived. The outstanding conditions will be fulfilled or waived on the closing date.

ECP’s fourth fund will make the payment for the transaction on November 3, 2021, the closing date. The fund had made a final close around $640 million in November 2018.

The PE firm, which has seen key exits from its management team including of co-founder Vincent Le Guennou, had received a conditional go-ahead to buy Burger King’s operations in South Africa last month.

BKSA had acquired the rights to the master franchise for the Burger King brand in South Africa and opened the first restaurant, in Cape Town, in May 2013. Today, it has 97 outlets in the country.

The Competition Tribunal of South Africa had approved the proposed transaction subject to several conditions. This included a rider that BKSA would need to attract investment of at least ZAR500 million ($34 million) in aggregate capital expenditure and establish at least 60 new Burger King outlets in South Africa within five years. This would increase the total number of outlets to at least 150.

It also would have to increase the number of historically disadvantaged persons as permanent employees in South Africa by at least 1,250. In addition, it would have to increase the total value of all payroll and employee benefits in respect of such additional employees by over ZAR120 million ($8 million).

Moreover, it would have to improve its rating for the Enterprise and Supplier Development element under its B-BBEE (Broad-Based Black Economic Empowerment) scorecard.

BKSA would also need to establish an employee share ownership programme for an effective 5% stake.

Most importantly, ECP would need to dispose of Grand Foods Meat Plant and will have to conclude a supply agreement with the buyer of this business.

This had put the ball in the court of the PE firm. The new deal structure means it would not have operational control over the key backend supplier to the business. So, while it may enjoy a captive supply agreement, it may not have full backward integration for the franchise.


The Competition Commission of South Africa had previously shown a red signal to the proposed deal that was inked in February by Grand Parade, which followed a previous offer that was revised in mid-2020.

Grand Parade was looking to sell its entire 91% stake in BKSA and was to capitalise some loans to the firm amounting to a 4.7% stake. Effectively, this was to lead to divestment of a 95.7% stake for around ZAR546 million ($36.8 million).

The Competition Commission had said it found that the deal would lead to a reduction in the shareholding of the historically disadvantaged people in the target company from more than 68% to 0%.

South Africa has an affirmative action policy with respect to black empowerment.

This decision by the commission came under heavy criticism.

The commission found that the proposed transaction was unlikely to result in a substantial prevention or lessening of competition in any relevant markets. However, it noted that the PE firm had no ownership of historically disadvantaged persons as against the current owners where it is at 68%.

ECP was established around 20 years ago and has raised more than $3 billion for private equity investment in Africa. It has made over 60 investments across the continent and has fully exited 45 of these investments, returning over $1.3 billion to investors to date. It has offices across Johannesburg, Nairobi, Abidjan and in Washington DC.

The PE firm’s most recent fund, ECP Africa Fund IV, and related entities achieved a final close in September 2018. It has over $640 million in commitments.

The firm has completed 12 transactions in the consumer sector. In the restaurants segment, it had backed Java House and Artcaffe Group previously.

Vivek Sinha

The Capital Quest