Famous Brands has acquired the franchise agreements, trademarks and intellectual property of the O’Hagan’s Irish Pub and Grill brand from O’Hagan’s Franchising (Pty) Ltd for an undisclosed sum. The purchase consideration is less than 0,5% of Famous Brands’ market capitalisation. The acquisition will be funded through existing cash reserves, and will be earnings enhancing.
Assuming successful conclusion of the due diligence exercise, the effective date of the transaction is 01 December 2010.
Currently the O’Hagan’s franchised network consists of 26 outlets, 22 in South Africa, one in Botswana, one in Zambia and two in Zimbabwe.
Famous Brands CEO, Kevin Hedderwick says, “Having recently entered the Pub and Restaurant category via our acquisition of the KEG and McGinty’s brands, the acquisition of O’Hagan’s provides us with an opportunity to literally double the size of our existing network in this industry, at a compelling price.”
“To open another 26 franchised pubs would conservatively take the Group about five years, whereas with this prudent investment that is immediately achieved.”
He notes, “This transaction aligns itself with our recently expanded leisure landscape but also cements our deliberate strategy to play a leading role within those categories in which we compete. This acquisition demonstrates our intent to be a serious player in the Pub and Restaurant market.”
Hedderwick elaborates on the rationale for the acquisition, “We have already put in place a Pub and Restaurant Division specifically designed to expand its capacity as opportunities arise, so the cost of take-on of this additional business to the division is minimal. Given existing surplus capacity, we will increase our Pub and Restaurant division’s turnover by 50%, but nearly double the operating profit.”
Also key to this acquisition are the synergies and benefits to be extracted from integrating O’Hagan’s into the Group’s comprehensive business model.
The business of O’Hagan’s Franchising was acquired in 1999 by entrepreneur John Weir-Smith. Weir-Smith says, “Famous Brands is in a position to take the O’Hagan’s brand to the next level. They will rejuvenate these businesses and give them the ability to grow and improve their profitability.”
Hedderwick comments, “Our acquisition of the O’Hagan’s brand further endorses our confidence in the Pub and Restaurant category’s potential and our ability to shape the future of this business in South Africa. The Group will be launching a new brand identity and positioning for KEG and McGinty’s in March 2011. Similarly, the positioning of the O’Hagan’s brand will be robustly unpacked and interrogated early in the new year. We are not only confident that this acquisition will have an important benefit on revenue for Famous Brands, but is also part of our longer term ambition for the category per se, which plans will be announced in due course,” he says.
Hedderwick concludes, “Our strong balance sheet, proven brand stewardship model and depth of management expertise augurs well for the rapid integration of O’Hagan’s into the Famous Brands business.”
Hedderwick notes that there is a gap in the local market place for a pure artisan bakery offering. He says, “At present baked goods in this country tend to be mass produced, but increasingly people are seeking out artisan preparation and wholesome quality, evidenced by the increase in fresh food markets. There is a rich heritage in the USA, UK and Europe where strong franchise models built on artisan baking thrive; South Africa is starting to adopt international trends in terms of a renewed appreciation for artisan preparation and high quality foods, and we are excited about pioneering this category together with the current Vovo Telo team.”
Vovo Telo prepares bread and pastries in the traditions of Italy and France. There are no artificial ingredients or additives, just flour, water, salt and some yeast. Each individual loaf is prepared from finest stone-ground flour, is slow fermented, hand shaped and baked fresh daily. As a result, each loaf is unique and distinctive. Repton says, “The skill of an artisan baker is difficult to acquire and difficult to replicate and is an important source of differentiation for the brand.”
Light, healthy wholesome meals using fresh ingredients are prepared daily for breakfast, lunch and in-between snacks. Expert baristas produce a range of coffees featuring crema art.
Repton comments, “Our aim is to be the neighbourhood bakery where customers can develop a relationship with their baker and not just buy bread, but also enjoy an experience. We felt that in order to expand our concept we needed a ‘’big brother’. Famous Brands provides us with the facilities and knowledge to accelerate our expansion process, which enables us to concentrate on what we do best – which is to produce great bread.”
Hedderwick concludes, “Matt Repton’s genius in identifying the demand for artisan bread and pastries and his quest for quality will enable us to grow this category from start-up, with it potentially becoming an indispensable offering on the epicurean menu. Whilst this acquisition represents a relatively small investment for a Group of our size, the opportunity to change the food lover’s landscape forever is tremendously exciting.”
Notes to editors:
|The Group’s brand portfolio includes Steers (524], Wimpy including UK (642), Debonairs Pizza (315), FishAways (112), Mugg & Bean (108), tashas (6), House of Coffees (19), Brazilian/Brazilian Café (48), Blacksteer (12), Giramundo (6), Keg (27) and McGinty’s (5), Vovo Telo (3) and O’Hagan’s (26).The Group also manufactures and supplies its franchisees and the retail trade with a wide range of meat, sauce, bakery, ice cream, fruit juice and mineral water products.|
For further information:
Chief Executive Officer
Famous Brands Ltd
Telephone: 011 651 5812
Mobile: 083 395 8608