Famous Brands puts Cape Franchising on its plate
November 16, 2007
Johannesburg - Famous Brands has entered into an agreement for the purchase of the business of Cape Franchising, successfully completing the final phase in its process of acquiring all master licenses in South Africa.
The acquisition consideration of approximately R150 million is expected to deliver a number of synergistic benefits that will be explored post the effective date of 1 March 2008 and is subject to a number of conditions precedent including that of the necessary due diligence as well as Competition Commission approval.
Kevin Hedderwick, Chief Operating Officer of Famous Brands, said the acquisition in the immediate short term will be earnings neutral, but will in the long term, unlock further value for Famous Brands and its shareholders.
Hedderwick explained that the master licensee model, a strategic intervention entered into by the group during the 1990s, does not align itself with the current Famous Brands business model and so, in September 1997 Famous Brands bought back the master licence agreement for KwaZulu Natal and the Eastern Cape master licence agreement in November 2002.
This latest acquisition of the business of Cape Franchising concludes the buyback process.
The businesses being acquired include a licensing agreement for the Steers and Debonairs Pizza brands as well as the distribution agreement which entitled Cape Franchising to manufacture and distribute all of Famous Brands products within the territory.
The successful conclusion of this agreement will result in Famous Brands taking full ownership of their franchising and distribution businesses within the Western Cape market.
"We have bought back a contract which had 10 years left to run with a further 25 year option. This is a strategically significant acquisition for the group," said Hedderwick.
All operational personnel will be taken over by Famous Brands however, the current directors of Cape Franchising will be exiting the business as at the completion date.
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