BurgerFuel shares surge on US deal

MICHAEL FOREMAN
Last updated 14:34 14/01/2014

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The founders of the Subway sandwich chain are buying a stake in New Zealand listed gourmet hamburger company BurgerFuel Worldwide.

Under the terms of an agreement announced to the stock exchange today, United States-based Franchise Brands will buy an initial 10 per cent stake in BurgerFuel with an option to increase its holding up to 50 per cent over eight years.

Franchise Brands will also collaborate with BurgerFuel "by providing knowledge and support as well as global development opportunities, including in the United States where BurgerFuel plans to open restaurants," the companies said.

BurgerFuel chief executive Josef Roberts described the deal as "a major event in the history of BurgerFuel".

"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," he said.

BurgerFuel would keep control over its brand and operating style and would retain its listing on the NZAX, Roberts said.

Franchise Brand's initial 10 per cent stake will comprise a $5.9 million placement of new BurgerFuel shares and the purchase of $2.16m of shares from BurgerFuel's majority shareholder, Mason Roberts Holdings.

The purchase price is $1.35 a share, which was the trading price when discussions were first initiated in April last year, BurgerFuel said.

Franchise Brands, which was established in 2005 by Subway founders Fred DeLuca and Peter Buck, provides advice to small and medium-sized companies wanting to expand their franchise businesses. Subway operates more than 40,000 franchised outlets in more than 100 countries.

BurgerFuel operates 30 stores in New Zealand, 13 outlets in the Middle East and one store in Sydney.

BurgerFuel's total revenue for the year to March 31 was $49.3m, of which $31.3m was earned in New Zealand and $16.7m in the Middle East. Net profit after tax was nearly $1.1m.

At BurgerFuel's last annual meeting in September chairman Peter Brook said the company expected to open about 22 new stores this financial year, double the 11 new stores opened in the previous year.

BurgerFuel said the Franchise Brands deal would see the company have cash reserves of about $9m-$10m and no debt.

BurgerFuel's shares were trading at $2.10early this afternoon, up 40 per cent on yesterday's close.

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- Fairfax Media

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