KFC: CA to rule on takeover

SHARE   |   Monday, 22 January 2018   |   By Kabelo Adamson
KFC: CA to rule on takeover

The Competition Authority (CA) will have to make a fresh ruling in the proposed sale of business and sale of assets of four companies that were operating KFC restaurants in Botswana and are currently under liquidation. The four companies are VPB Propco, QSR Food Company (Proprietary) Limited, Boitumelo Dijo (Proprietary) Limited and Greenax (Proprietary) Limited. CA held a public hearing on Friday where a number of parties to the transaction, including other bidders were present to submit their verbal representations to the Authority with respect to the transaction as well as their competitors. In November last year, a special purpose vehicle formed solely for the acquisition KFC franchise in Botswana – Bradelymore’s Holdings (Pty) Ltd – emerged as the preferred bidder to take over KFC operations in Botswana. Bradelymore’s is a joint venture between Vivo Energy Africa Holdings Limited and Baobab Khulisani South Africa through its wholly owned Botswana registered entity – Seynara (Pty) Ltd. Vivo Energy, through its network of Shell-branded retail service stations in Botswana, is a marketer of various oil products including retail fuels, commercial fuels and lubricants whereas Baobab Khulisani, a South African KFC franchisee operates 11 stores in South Africa. Baobab Khulisani, through Seynara, currently does not directly or indirectly control in any firm in Botswana.

KFC Botswana, which has 12 restaurants here, was put under liquidation in June 2016 after the companies failed to honour its financial obligations with liabilities of over P100 m mostly in rental arrears and failure to pay fees to franchise holder – Yum Restaurants. Six of the 12 KFC restaurants were subsequently closed after they could no longer afford to service creditors, including rentals.Since the liquidation process started, which has now dragged for 18 months, liquidator Nigel Dixon-Warren of KPMG said they have received 65 responses from companies that have shown interest in acquiring the KFC business with the number being made of local and foreign companies. Dixon-Warren acknowledged that the process has taken more than it was initially envisaged to as the company going through liquidation will always be under a significant amount of pressure. One of the companies that expressed interest in acquiring the KFC businesses – Sefalana – had questioned the whole process which led to Bradelymore’s emerging as the preferred bidder. Sefalana Managing Director, Chandra Chauhan, asked Dixon-Warren as to how they arrived at the decision to give the bid to Bradelymore’s as to his knowledge they had put in a significant amount in the bid, adding that other bidders were told by the liquidator to increase their amounts. He also enquired about whom between the franchiser and the liquidator was responsible for choosing the preferred bidder. With a number of local companies having put in a bid, he said citizen-owned companies such as Sefalana which he said has the capability to run those restaurants could have been given the green light rather than foreign-owned companies.
Chauhan raised a number of issues pertaining to the transaction, including asking why two KFC restaurants were being developed at Pilane Crossing Mall and Mowana Park in Phakalane. Responding to those queries, Dixon-Warren acknowledged that due to the franchiser being involved in the whole liquidation process, inherently issues of conflict of interest were bound to arise from the franchiser and the liquidator. He explained that with respect to giving preference to citizen-owned companies, he had written to the ministry of trade to enquire if the government had any reservations for citizens with regard to KFC operations, but was assured that there was none. He told the parties to the transaction that he was at liberty to award any company which he deemed suitable to take over whether foreign or local. With regards to two KFC outlets currently being developed at Pilane Mall and Mowana Park, Dixon-Warren said prior to the liquidation process leases had already been signed and he had the choice to terminate them but chose to not do so.