The Competition Commission has blocked Grand Parade Investments’ sale of Burger King (South Africa) and Grand Foods to ECA Africa, a private equity fund, over significant reduction of shareholding of historically disadvantaged persons (HDPs) and workers. The Commission says the proposed transaction flouts section 12A(3)(e) of the Competition Act, which stipulates promotion of greater spread of ownership, in particular increasing the levels of ownership by HDPs.
The Competition Commission arrived at the decision after noticing that the sale would have led to the reduction of HDPs shareholding from 68% to 0%. “Target Firms are ultimately controlled by an empowerment entity, wherein historically disadvantaged persons have (HDPs) hold an ownership
stake of more than 68%. The Acquiring Firms have no ownership by HDPs. Thus, as a direct result of the proposed merger, the merged entity will have no ownership by HDPs and workers,” the Commission highlighted in a statement.
ECP Africa, the Acquiring Firm, is constituted by ECP Funds IV, while Burger King (South Africa) (BKSA) is an
American multinational chain of fast-food restaurants. Through its various franchise subsidiaries,
BKSA operates more than 90 fast food restaurants across South Africa.
Grand Foods Meat Plant (Pty) Ltd (Grand Foods) primarily supplies BKSA with burger patties.
Grand Parade Investments is an empowerment entity listed on the Johannesburg Stock
Exchange.