Famous Brands has acquired 51% of Lexi’s Healthy Eatery, an exciting but tiny vegan restaurant chain with three locations in Gauteng and one in Cape Town.

It is the company’s first acquisition since 2016 when it made its disastrous foray into the UK with the ill-timed acquisition of Gourmet Burger Kitchen for £120-million (about R2.1-billion).

It was hoped that the Gourmet Burger acquisition would be as much of a game changer for the group as its acquisition of Wimpy SA was in 2003. It was a game changer for sure, but the wrong kind, and between 2018 and 2019 Famous Brands twice wrote down its investment, first by R400-million and then by R874-million.

It also closed 20 underperforming stores in a desperate bid to keep the chain alive, but a year later, in October 2020, Covid-19 lockdowns forced the company to cut its losses and it impaired the asset by a further R1.3-billion, writing off its investment in the upmarket burger chain in full and putting the chain into administration.

In 2020, ahead of the Covid-19 pandemic, Famous Brands renegotiated its debt covenants with its primary lenders, who insisted that net debt-to-Ebitda reduce to less than 2.5 times for two consecutive periods before management could resume dividend payments.

By 31 August 2021 total borrowings had reduced to R1.4-billion, with net debt-to-Ebitda hovering at 3.5 times, still above the target required by the banks.

In 2020, Famous sold its 51% stake in restaurant chain Tashas back to its founders, the Sideris family. It also sold its 49% stake in Taste, which owned the By Word of Mouth catering business, back to its owners. In May 2021, it sold its 51% stake in Bread Basket to the business’s long-standing partners and founders.

This is all a far cry from the glorious decade between 2003 and 2013 that saw Famous Brands acquire no less than 22 restaurant chains, during which time the share price rose from R6.32 to R83. It journeyed up to R166 in October 2016 and has trickled down since then, currently hovering at R64.

Signalling a new beginning?

The acquisition is aligned with Famous Brands’ three-year strategic roadmap, which includes acquiring brands that have the potential to lead in their category, and which offer good growth prospects.

It also complements the group’s existing offering, which includes Steers, Debonairs, Mugg & Bean, Wimpy and Fishaways and does not include an exclusively vegetarian or plant-based offering.

Courtesy of FoodStuff – read full article here.