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Johannesburg - Famous Brands [JSE:FBR] announced Monday that it has acquired the franchise agreements, trademarks and intellectual property of Milky Lane and Juicy Lucy from Java Brands for R30.95m.
The acquisition will be funded through a combination of existing cash reserves and short-term debt, and will be earnings enhancing, the company said.
The transaction is subject to successful fulfilment of conditions precedent and is effective March 1 2011.
Famous Brands' chief executive officer, Kevin Hedderwick, commented: "The acquisition of these iconic South African brands serves to further round off our franchised food service leisure portfolio. The compelling purchase consideration and synergies afforded by the integration of Milky Lane and Juicy Lucy into the Group's business model make this transaction an exciting, low-risk one, which will deliver returns for shareholders from the outset."
Milky Lane was launched some 50 years ago by Famous Brands' founder George Halamandres, and currently consists of 96 franchised outlets.
"Milky Lane is the soft-serve ice cream category leader, which aligns with the Group's strategy to grow its portfolio of best in class franchised leisure brands. Furthermore, soft-serve is the fastest growing ice cream category in the world at the moment, and continues to gain traction in South Africa too," Hedderwick said.
"As the emerged market continues to enter the mainstream economy, driving growth in this category, there is an opportunity to extend the Milky Lane footprint in terms of store numbers, through both the existing sit-down as well as take-away trading formats, thereby improving accessibility to prospective franchisees and mass market consumers.
"A significant driver surrounding this acquisition is our ability to backward integrate the supply of soft-serve ice cream to the existing Milky Lane network via our Baltimore Ice Cream plant which has the spare capacity to take on this business. This additional manufactured volume on its own is a compelling case to acquire the Milky Lane business and significantly reduces the price/earnings hurdle rate."
Juicy Lucy has been in existence for 40 years, currently trades out of 18 franchised restaurants nationally.
"Juicy Lucy is a well-loved niche South African brand which affords us the opportunity to fill a gap in our portfolio. We have for some time been evaluating a range of specialist and stand-alone health food-focused type brands and are happy that Juicy Lucy offers the Group entry into this category," said Hedderwick.
The acquisition will be funded through a combination of existing cash reserves and short-term debt, and will be earnings enhancing, the company said.
The transaction is subject to successful fulfilment of conditions precedent and is effective March 1 2011.
Famous Brands' chief executive officer, Kevin Hedderwick, commented: "The acquisition of these iconic South African brands serves to further round off our franchised food service leisure portfolio. The compelling purchase consideration and synergies afforded by the integration of Milky Lane and Juicy Lucy into the Group's business model make this transaction an exciting, low-risk one, which will deliver returns for shareholders from the outset."
Milky Lane was launched some 50 years ago by Famous Brands' founder George Halamandres, and currently consists of 96 franchised outlets.
"Milky Lane is the soft-serve ice cream category leader, which aligns with the Group's strategy to grow its portfolio of best in class franchised leisure brands. Furthermore, soft-serve is the fastest growing ice cream category in the world at the moment, and continues to gain traction in South Africa too," Hedderwick said.
"As the emerged market continues to enter the mainstream economy, driving growth in this category, there is an opportunity to extend the Milky Lane footprint in terms of store numbers, through both the existing sit-down as well as take-away trading formats, thereby improving accessibility to prospective franchisees and mass market consumers.
"A significant driver surrounding this acquisition is our ability to backward integrate the supply of soft-serve ice cream to the existing Milky Lane network via our Baltimore Ice Cream plant which has the spare capacity to take on this business. This additional manufactured volume on its own is a compelling case to acquire the Milky Lane business and significantly reduces the price/earnings hurdle rate."
Juicy Lucy has been in existence for 40 years, currently trades out of 18 franchised restaurants nationally.
"Juicy Lucy is a well-loved niche South African brand which affords us the opportunity to fill a gap in our portfolio. We have for some time been evaluating a range of specialist and stand-alone health food-focused type brands and are happy that Juicy Lucy offers the Group entry into this category," said Hedderwick.
