| Tue 27 Feb 2007, 10:01 | | FBR - Famous Brands Limited - Famous Brands Acquir |
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FBR
FBR
FBR - Famous Brands Limited - Famous Brands Acquires Wimpy Uk
Famous Brands Limited
(Incorporated in the Republic of South Africa)
(Registration number 1969/004875/06)
Share code: FBR & ISIN code: ZAE000053328
("Famous Brands" or the "company")
Famous Brands Acquires Wimpy Uk
ACQUISITION OVERVIEW
Famous Brands has acquired a 75% stake in Wimpy UK, thereby achieving the
group`s stated strategic intent to enter the first world branded QSR/Casual
Dining market via acquisition. The remaining 25% shareholding is owned by
Halifax Bank of Scotland. The acquisition consideration is UK GBP3
million, with a further UK GBP2 million to be invested in re-energising the
brand. The business is currently funded via a debt structure of UK GBP9
million. The UK GBP5 million total investment will be funded through a
combination of cash reserves and debt finance. The deal is conditional
upon the Wimpy UK funding agreements becoming unconditional. Completion is
targeted for the 5th March 2007.
Wimpy UK, which comprises 194 outlets across England, Scotland and Wales,
and operates a further 20 restaurants under a master licence arrangement in
Ireland, has a 50 year heritage, and is the largest independently owned
franchised restaurant chain in the United Kingdom. The business owns the
Wimpy trademark in 15 European countries.
Famous Brands` Chief Operating Officer, Kevin Hedderwick, says: "This deal
has been in the making for two years. It is the culmination of thorough
research and diligent investigation and negotiation. We are delighted to
announce a transaction of this nature which provides a strategic
opportunity to consolidate the Wimpy brand and gain access to the UK
market."
He adds: "We have always maintained that the most prudent way to enter the
first world market is through an existing brand because the onerous
barriers to entry prohibit building a brand from start-up. The key to this
acquisition is that Wimpy UK has a significant, established footprint, it
is a brand we are intimate with, and it offers considerable upside
potential."
The group`s Wimpy Southern Africa network comprises 452 restaurants.
"Our intellectual property which has been developed and fine-tuned over
many years in South Africa will be transferred to the UK operation. Wimpy
UK has enjoyed iconic status in the past, and our task will be to restore
it to that position by invigorating the brand and employing meaningful
strategy to capitalise on its obvious prospects," he elaborates.
Famous Brands Group Financial Director, Paris Papageorgiou, comments: "For
an initial short term period the acquired business will not be earnings
enhancing. Our investment will be aimed at reinvesting in the brand and
exploiting the inherent potential therein. Key to obtaining Board approval
to proceed with this transaction was the desire to protect our existing
shareholders, which has been achieved through the financing structure
agreed with Halifax Bank of Scotland."
Director of Integrated Finance Asset Management at Halifax Bank of
Scotland, Alan Ross, says: "HBoS is delighted to assist in Famous Brands`
arrival in the UK. Having met Kevin Hedderwick and his colleagues we are
looking forward to a long and fruitful partnership based on a solid
foundation of experience, brand stewardship and a determination to
succeed."
NATURE OF THE BUSINESS OF WIMPY UK
Wimpy UK is a suburban, casual dining restaurant offering. The restaurant
network includes representation on 25 Road Chef Motorway Service Areas
(petroleum station forecourts), which are high-visibility multi-offering
sites on transit routes, resembling the Engen-Wimpy alliance model in South
Africa.
The business is a pure franchise model; it does not have manufacturing
capacity and product for franchises is supplied by third party vendors.
RATIONALE FOR THE ACQUISITION
This acquisition rationale centres on a low risk / low cost strategy
affording optimal entry into a first world economy. The acquired business
aligns with Famous Brands` strategic intent and core competencies, and the
group`s South African intellectual property and experienced management will
add significant value in revitalising the business.
Hedderwick says: "Historically the Wimpy trademark has been globally
fragmented. This acquisition serves to unite trademark representation in
Wimpy`s two major markets, South Africa and the UK. This unification will
also position the brand for improved consistency and uniformity in future
and enhance our global-brand aspirations."
Wimpy UK is positioned in a growing market, which evinces the trends
characteristic of the QSR industry globally: the increasing demand for
convenience, the shift to out of home consumption and the evolution of
casual dining as a way of life. It is estimated that the UK burger/chicken
market will be valued at UK GBP4.2 billion in 2007.
STRATEGY
Short term ambitions for Wimpy UK will be to re-engineer the business to
align it more closely with the Wimpy SA model and offering. In this
regard, the brand architecture and retail footprint will be overhauled and
re-engineered to ensure a fresh, contemporary presence. From an
operational perspective, opportunities exist in procurement centralisation
and rationalisation.
Hedderwick comments: "Management`s immediate focus will be on
consolidating and optimising the existing structure, and as such, we will
proceed with caution regarding the opening of any new restaurants in the
immediate short term. The same will apply regarding the roll-out of any of
our other brands into the UK."
Over the medium term the intention will be to explore opportunities to
expand the Wimpy brand globally. Opportunities to export Famous Brands`
manufactured products to Wimpy UK will also be investigated.
The long term goal will be to use the Wimpy UK platform to launch a
multiple brand offering for Famous Brands globally.
MANAGEMENT
Darren Hele, Divisional Director: Franchising of Famous Brands, and
formerly Wimpy SA Managing Director, will replace Wimpy UK`s incumbent CEO,
John Davison. Hele was instrumental in reviving Wimpy SA over an eight
year period and positioning it as a brand leader in the casual dining
sector in South Africa. The business was subsequently acquired by Famous
Brands in 2003. Hele will be based in London. The balance of the UK
senior management structure will remain intact.
Hele comments: "The journey towards Wimpy becoming a global brand has long
been a dream of mine and to be given this opportunity is extremely
exciting. It is a challenge that I intend to relish. I am looking forward
to the prospect of working with both the Wimpy UK team as well as our
franchise partners, and am confident that our combined experience will
benefit the operation."
John Davison, outgoing Wimpy UK CEO, says: "Wimpy is a leading restaurant
chain in Southern Africa with over 450 units, all franchised, as it is here
in the UK. This transaction puts together a wealth of experience, which
should create a very exciting future with great opportunities. Having been
with Wimpy for 33 years I have enjoyed many commercial challenges with
great support from everyone, especially our franchisees. I wish everyone
success."
Wimpy SA`s business will operate independently from the UK operation,
however both entities will benefit from shared intellectual capital,
processes and new product development.
27 February 2007
Date: 27/02/2007 10:01:01 Produced by the JSE SENS Department.
