UAC is a diversified conglomerate with operations in foods, paints, logistics and real estate. UACR manages the Quick Service Restaurant (QSR) component of UAC's business and houses the flagship Mr Bigg's brand, said to be the single largest food franchise brand in Africa, north of the South African border.
The acquisition consideration has not been disclosed, and will be funded out of cash reserves. This transaction falls below the threshold of a categorised transaction in terms of the Listings Requirements of the JSE Limited ("JSE").
UACR comprises 165 franchised restaurants across Nigeria, 57 of which are in Lagos and 14 in Abuja. 45% of the company's franchised restaurants and 40% of its revenues are concentrated in Nigeria's three key commercial centres. UACR also has a small logistics and manufacturing component.
Famous Brands Chief Executive, Kevin Hedderwick comments, "Whilst we have traded in Nigeria for the past 11 years through a combination of Master License and Franchise Agreements, this transaction catapults us to a completely different level, enabling us to meaningfully expand our presence in this burgeoning, currently low consumption per capita organised food service market.
"This joint venture delivers compelling benefits for both parties: UACR will be vending in a formidable brand (Mr Bigg's), local expertise and existing franchisees, as well as a nationwide distribution network and Lagos-based manufacturing infrastructure. In exchange, Famous Brands will add value to the business through our expertise in managing intellectual property, growing brands and optimising supply chain operations and efficiencies."
Mr Bigg's trading format consists of quick service restaurants situated on high foot-fall sites, and its product offering ranges from pastries and other snacks to burgers and hot meals. About 25,000 pieces of chicken are sold in Mr Bigg's restaurants daily while some 635,000,000 meat pies have been sold by the brand since its inception.
Hedderwick states, "Historically one of the key challenges of expanding into the rest of Africa has been to source suitable local partners. This acquisition surmounts that obstacle and enables us to not only acquire a substantial stake in an existing leading home-grown brand in Nigeria with opportunities to unlock value in that market, but also to export the format to other markets. We foresee our operations in the rest of Africa becoming increasingly significant to the Group over time."
Larry Ettah, UAC Group Managing Director and CEO, says, "This is a transformative transaction which ensures UACR has the necessary strategic partner to unlock the considerable value potential in the QSR landscape which Mr Bigg's defined 25 years ago and in which it still maintains a leadership position."
"Nigeria is an attractive destination for QSRs and the country has seen an influx of international brands recently. Future consumer expenditure is underpinned by a range of key drivers, including higher monthly income levels resulting from GDP expansion, an increase in the minimum wage (from N7500 to N18000), and a shift in social class demographics, with the middle class (the business's core target market) expected to increase to 35% of the population in 2015 compared to 30% in 2009. Significantly, this middle class comprises a large, young population with an average age of 18," concludes Ettah.
