15 Jan 2014

US investor buys into BurgerFuel

2:16 pm on 15 January 2014

A US investor Franchise Brands is buying a 10% stake in NZ burger company BurgerFuel, which will help its worldwide expansion plans.

Franchise Brands of Connecticut will buy a 10% stake at $NZ1.35 apiece with an option to lift its holding to 50% over eight years.

The company said in a statement on Tuesday it will support the firm's growth plans, including in the United States where BurgerFuel plans to open restaurants.

The initial stake will be a $NZ5.9 million placement of new shares, and the purchase of $NZ2.16m of shares from controlling shareholder Mason Roberts Holdings.

BurgerFuel will have cash reserves of between $9 - $10 million and no debt when this is completed.

Franchise Brands was founded in 2005 to invest in small- and mid-sized companies seeking to expand their businesses. It is backed by the founders of the Subway restaurant chain, Fred DeLuca and Peter Buck. Its investments include Mama DeLuca's Pizza, Personal Training Institute, HomeVestors and Taco Del Mar.

AAP reports the deal was at a 10% discount to the $1.50 price the stock was trading at before the announcement, and the shares have since gained 11% to $1.66. That values the company at $NZ91.8m.

"This gives us the opportunity to turbocharge our business by going into the United States and other countries, alongside the largest franchise company in the world," said chief executive Josef Roberts.

"BurgerFuel will retain control over its unique brand and operating style, and we will remain a publicly-listed New Zealand company."

In recent years, BurgerFuel has increased its exposure to the Middle East by signing master licensing agreements, which earns the company up-front territory fees and on-going royalties based on store turnover.

AAP reports the deal needs shareholder approval, and the company said it would set a date for an extraordinary general meeting shortly.