Restaurant franchise group Spur Corporation has entered into an agreement to acquire the 10% stake in the company sold to Grand Parade Investments (GPI) in 2014. The value of the transaction is R260 million, equating to R24.00 per share.
Spur Corporation concluded a broad-based black economic empowerment transaction with the black owned and controlled GPI in October 2014, issuing 10.8 million shares or 10% of the company’s issued share capital at R27.16 per share, for a total cost of R295 million. Spur Corporation funded 25% of the transaction value.
The transaction included a lock-in period of five years in which GPI was restricted from trading in the Spur Corporation shares.
Group CEO Pierre van Tonder said “our board took a decision to negotiate an amicable separation from the BEE relationship with GPI which we believe is in the best interests of our shareholders.”
Following the transaction, the 10.8 million repurchased shares will be cancelled. The debt owing by GPI to the group will be settled by GPI as part of the transaction.
Van Tonder said the repurchase of the shares will benefit existing shareholders as it will enhance earnings and increase dividends per share, while marginally improving the group’s return on equity.
“The group is in a strong cash position. As there are currently no material acquisition or investment opportunities that we are pursuing, we believe it is prudent to use our cash reserves for this transaction. After the share repurchase, and subsequent settlement by GPI of the debt owing to Spur Corporation, the group will have cash on the balance sheet in excess of R150 million which positions us well to capitalise on any potential acquisitions,” he said.
At its last reporting date of 31 December 2018, Spur Corporation held cash and cash reserves of R254 million.
In an unrelated transaction, Spur Corporation plans to repurchase and cancel 6.6 million treasury shares which will increase the group’s capacity to buy back shares in the future. The treasury shares will be repurchased at R22 per share for a total cost of R146 million. This transaction will have no material financial impact on the group.
Both share repurchase transactions are subject to regulatory and shareholder approvals. The shareholder meeting to vote on the transaction is anticipated to be held in late September 2019. Subject to the fulfilment of the necessary conditions precedent, the effective date of the transaction is anticipated to be mid October 2019.