Famous Brands announced on Tuesday that it has acquired the franchise agreements, trademarks and intellectual property of the O'Hagan's Irish Pub and Grill brand from O'Hagan's Franchising for an undisclosed sum. The purchase consideration is less than 0.5 percent of Famous Brands' market capitalization, it said.
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 1 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.
Double in size
Famous Brands CEO Kevin Hedderwick said: "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."
"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," he noted.
Take it to the next level
"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 percent, but nearly double the operating profit," he added.
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.
"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," said Weir-Smith.
"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," Hedderwick added.
"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," he concluded.
Famous Brands brand portfolio includes Steers, Wimpy including UK, Debonairs Pizza, FishAways, Mugg & Bean, tashas, House of Coffees, Brazilian/Brazilian Café, Blacksteer, Giramundo, KEG, McGinty's and Vovo Telo.