BurgerFuel gets $5.9 mln injection from new US investor to fund global expansion

Tuesday 14th January 2014

Burger Fuel Worldwide, the NZAX-listed fast food chain franchisor, will raise $5.9 million from a new US investor, Franchise Brands, to help fund its global growth aspirations, including plans to reach into the world's biggest economy.

Milford, Connecticut-based Franchise Brands will buy a 10 percent stake at $1.35 apiece with an option to lift its holding to 50 percent over eight years, and will support the New Zealand firm's growth plans, including in the US where BurgerFuel plans to open restaurants, the company said in a statement.

The initial stake will be made up of a $5.9 million placement of new shares, and the purchase of $2.16 million of shares from controlling shareholder Mason Roberts Holdings. Once it's completed, BurgerFuel will have cash reserves of between $9 million and $10 million and no debt, it said.

Franchise Brands was founded in 2005 to invest in small and mid-sized companies seeking to expand their businesses, and 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.

The deal was at a 10 percent discount to the $1.50 price the stock was trading at before the announcement, and the shares have since gained 11 percent to $1.66. That values the company at $91.8 million. The shares were trading at the $1.35 trading price when discussions started in April last year.

"This gives us the opportunity to turbo charge our business by going into the US and other countries, alongside the largest franchise company in the world," chief executive Josef Roberts said. "BurgerFuel will retain control over its unique brand and operating style and we will remain a publicly listed New Zealand company."

In December, the company said it was scaling up the next phase of its global development and would spending financial year 2014 investing in latching on to those opportunities.

In recent years Burger Fuel 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.

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

BusinessDesk.co.nz

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