There’s a big new investor in Burger King’s South African owner – after its unpopular boss dumped R60 million of his shares
- Grand Parade Investments' share price jumped by 20% over the past week after confirmation that its chair sold a large stake in the company to a private equity investor.
- Smaller shareholders have been in open revolt against Hassen Adams over the past year.
- They hope that the new investor, Value Capital Partners, will help streamline the business.
After many months of high drama at Grand Parade Investments, its executive chair and founder Hassen Adams, sold 20 million of his shares this week for some R60 million.
He still holds an estimated 44 million shares in the company, but smaller shareholders have welcomed the transaction as a sign that he is loosening his grip on GPI. The company’s share price jumped almost 15% on Wednesday. Over the past week, it gained 20%.
Adams sold his shares to Value Capital Partners, an investment company which also holds stakes in Sun International, PPC and Altron. VCP’s chairman Antony Ball founded the private equity firm Brait.
VCP now holds an estimated 21% of GPI, which owns the South African franchise for Burger King, as well as stakes in Sunwest (GrandWest casino) and the gaming machine operation SunSlots.
For the past year, small shareholders – including Denker Capital, Kagiso and Rozendal Partners - have been in open revolt against Adams. They blamed Adams for the exodus of execs at GPI, including the loss of two CEOs, as well as the chief financial officer and the CEO of Burger King South Africa, in the past two years.
The shareholders also object to bonuses of R26 million paid to directors over the past two years, while GPI was suffering losses.
GPI has made large capital allocation mistakes, says Paul Whitburn, portfolio manager at Rozendal. This includes the decision to bring the US fast-food groups Dunkin Donuts and Baskin Robbins to South Africa, as well as misjudged Burger King and property deals. GPI has recently decided to close Dunkin Donuts and Baskin Robbins in South Africa.
Having VCP on board will bring a more focused approach and helped to streamline the business, says Whitburn. VCP’s experience in the casino industry, through its holding in Sun International, will be particularly helpful.
Some 70% of the value in GPI is represented by Sunslots and Grandwest casino in Cape Town.
Grandwest, which has a casino monopoly in Cape Town, enjoys the highest margins of any casino in South Africa, says Whitburn. The Grandwest and Sunslots businesses are continuing to grow above inflation - which in this consumer climate is exceptional, says Whitburn.
The growth should come from Burger King in coming years, he believes. After spending more than a billion rand on Burger King over the past seven years, the chain is at last making a small operating profits but any expansion must be done carefully and slowly.
Rozendal would support VCP getting at least two directorships.
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