BFW – Notice of Annual Meeting – Thursday 30th August 2018
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is given that the Annual Meeting of Shareholders of Burger Fuel Worldwide Limited
(the “Company”) will be held on Thursday 30th August 2018 commencing at
2.00 pm at 66 Surrey Crescent, Grey Lynn, Auckland.
AGENDA
The business of the meeting will be as follows:
ORDINARY BUSINESS
A. Resolution 1: Re-election of director
To consider the re-election as a Director of the Company of Alan Dunn, who
retires by rotation in accordance with section 17.1 of the Company’s Constitution
and, being eligible, offers himself for re-election.
See Explanatory Notes.
B. Resolution 2: Auditor’s Remuneration
To record the automatic re-appointment of Staples Rodway as the Company’s
auditor pursuant to Section 207T of the Companies Act 1993 and to authorise the
Company’s Board of Directors to fix the auditor’s remuneration for the ensuing
year.
C. Annual Report
To receive the Annual Report of the Company for the year ended 31 March 2018,
including the financial statements of the Company and auditor’s report.
SPECIAL BUSINESS
D. Resolution 3: Proposed buy back and cancellation of shares of Franchise Brands
LLC
To consider, and if thought fit, to approve by an ordinary resolution the
proposed buy back and cancellation by the Company of 2,820,000 shares held
by Franchise Brands LLC (“Franchise Brands”) at approximately US$0.25 per share
(approximately NZ$0.37 per share).
Shareholder approval is sought because the effect of the buyback and
cancellation of Franchise Brands’ shares will be that each of JCR Investment Trust
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(“JCR Investment”) (held through registered holder Mason Roberts Holdings
Limited) and its associated persons CMJR Trust and E&P Foundation Trust (together
“JCR Associates”) will increase control of the Company from 63.95% to 67.31% and
the Takeovers Code would otherwise apply. If the buyback is approved, all other
shareholders will proportionately increase their shareholdings (see Table A in
Explanatory Note C below) but the resulting increase in control of JCR Associates
would otherwise trigger the Takeovers Code. Shareholder approval will exempt
that increase in control from the application of the Takeovers Code.
The proposed buyback is for all the 2,820,000 remaining shares in the Company
held by Franchise Brands, which currently holds 4.99% of the total number of
voting securities of the Company. The buyback will occur within 10 days of
approval by shareholders. Following the end of the collaboration agreement
between Franchise Brands and the Company in 2016, Franchise Brands agreed
to sell its 10% shareholding in April 2018 for US$1.5 million, which is approximately
US$0.25 per share. To be clear, the buyback does not extend to any other
shareholders.
On 17 July 2018, the Company bought back and cancelled 3,143,355 shares
from Franchise Brands representing 5.27% of the Company’s total voting securities
for US$790,667.75 at the same price of approximately US$0.25 per share. This
resulted in a proportionate increase in all other shareholdings and JCR
Associates’ control increasing from 60.58% to 63.95%. Under the Takeovers Code,
JCR Investment as the controller of between 50% and 90% may increase control
by up to 5% over 12 months (also known as the ’creep’ exception). CMJR Trust
and E&P Foundation Trust were permitted to participate under an exemption
notice that requires them to sell down their individual increases in control before
the proposed buyback. They will do so by selling to JCR Investment (the “Clause 5
Exemption Purchase”). That previous share buyback therefore did not require
shareholder approval.
In addition to Franchise Brands, JCR Investment and its associated persons
including CMJR Trust and E&P Foundation Trust are not permitted to vote on this
ordinary resolution.
The ordinary resolution to be considered is:
“That the Company’s shareholders approve, for the purposes of the Takeovers
Code, the buy back and cancellation of 2,820,000 fully paid ordinary shares in the
Company held by Franchise Brands LLC at approximately US$0.25 per share for a
total consideration of US$709,332.25 to be paid in 4 instalments over 8 months and
funded from the Company’s cash reserves.”
See Explanatory Notes.
Resolution 3 is the subject of an Independent Adviser’s Report for the purposes of
the Takeovers Code prepared by Simmons Corporate Finance Limited.
Shareholders are encouraged to read carefully this document and seek financial,
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legal and other advice as appropriate before deciding how to vote. A copy of
the Independent Adviser’s Report accompanies this Notice of Meeting.
E. General Business
To consider such other business of the Company as may be properly brought
before the meeting in accordance with the Company’s Constitution.
By order of the Board of Directors of the Company
Mark Piet,
Company Secretary / Chief Financial Officer,
Burger Fuel Worldwide Limited
Auckland, New Zealand
15
th
August 2018
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EXPLANATORY NOTES
Each of the resolutions to be considered, and if thought fit, to pass, at the Annual
Meeting are ordinary resolutions. An ordinary resolution means a resolution that is
approved by a simple majority of the votes of those shareholders entitled to vote and
voting on the resolution.
A. Resolution 1: Re-election of Alan Dunn as director
One Director, Alan Dunn retires by rotation in accordance with the Company’s
constitution. Being eligible, Alan Dunn offers himself for re-election at the Annual
Meeting.
Alan enjoyed 30 years with McDonalds both internationally and within New Zealand. He
was appointed Chairman and CEO McDonalds NZ in 1993. In 2004 he moved to
Chicago as VP operations and was subsequently asked to take on the role of Regional
VP, McDonalds Nordics and Managing Director Sweden. Alan retired from McDonalds in
2007 and subsequently returned to New Zealand.
Through his own company, Trumpeter Consulting, Alan consults to a small number of
businesses in a variety of industries and holds directorships on Z Energy Limited and New
Zealand Post.
Alan joined the Board at BurgerFuel in 2009 as an independent director and is currently
Chairman of the Audit Committee.
The Board of Directors (except Alan Dunn) unanimously recommends shareholders vote
in favour of the re-election of Alan Dunn.
B. Resolution 2: Auditor’s Remuneration
Staples Rodway is automatically reappointed as the Company’s auditor under Section
207T of the Companies Act 1993. This resolution authorises the Board of Directors to fix
the fees and expenses of the auditor for the ensuing year.
C. Resolution 3: Proposed buy back and cancellation of shares of
Franchise Brands LLC
What is the effect of the resolution?
Shareholder approval will permit the increase in control of the Company by each of JCR
Investment and its associated persons CMJR Trust and E&P Foundation Trust (together
“JCR Associates”) from 63.95% to 67.31% arising from the proposed share buyback under
an exception to the Takeovers Code. Without shareholder approval, the Takeovers
Code would apply to prevent that increase in control in the absence of another
permitted exception applying. Table A below shows the changes in shareholding and
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control if the resolution is passed. The total number of shares on issue before the
proposed buy back is 56,490,195 and after would be 53,670,195.
Table A
What is the proposed share buy back?
Specifically, the buyback by the Company is for all remaining 2,820,000 fully paid
ordinary shares in the Company held by Franchise Brands at a total price of
US$709,332.25 at approximately US$0.25 per share (approximately NZ$0.37 per share).
The buyback will occur within 10 days of approval by shareholders. These shares
comprise the balance of the shares held by Franchise Brands following the recent share
buyback of 3,143,355 shares at the same price per share. That followed the agreement
reached in April 2018 with Franchise Brands to sell its 10% shareholding for US$1.5 million,
subject to obtaining the necessary approvals.
What happens if the resolution is not passed?
If the resolution is not passed, the proposed share buyback will not proceed. Franchise
Brands will remain the holder of 2,820,000 shares in the Company. All shareholdings
including those of the CMJR Trust and E&P Foundation Trust will remain unaffected. JCR
Associates’ control will remain at 63.95%. Franchise Brands has not informed the
Company of its intentions if the buyback is not approved. To be clear, the previous share
buyback is not affected by whether this resolution is passed.
Who can vote?
In addition to Franchise Brands, JCR Investment and its associated persons including
CMJR Trust and E&P Foundation Trust are not permitted to vote on this ordinary resolution.
All other shareholders may cast a vote on this resolution.
BFW Shares
JCR
Associates
Total
JCR
Investment
CMJR Trust
E&P
Foundation
Trust
36,123,473 30,480,573
2,742,900
2,900,000
Shareholding Percentage 59,633,550
60.58% 51.11% 4.60% 4.86%
Buyback & cancellation #1 - (17/07/2018) (3,143,355)
New shareholding percentage 56,490,195
63.95% 53.96% 4.86% 5.13%
Percentage change - First buyback & cancellation
3.37% 2.84% 0.26% 0.27%
Share Sell Down 297,444 (144,582) (152,862)
New Shareholding 36,123,473 30,778,017
2,598,318
2,747,138
Revised shareholding % after Clause 5 Exemption Purchase
56,490,195
63.95% 54.48% 4.60% 4.86%
0.53% (0.26%) (0.27%)
Proposed Buyback & cancellation #2 (2,820,000)
New shareholding percentage 53,670,195
67.31% 57.35% 4.84% 5.12%
Percentage change - Second buyback & cancellation
3.36% 2.86% 0.24% 0.26%
Total Change percentage 6.73% 6.23% 0.24% 0.26%
** This table excludes the Mason Family Trust because it is not an associate party - Please see discussion below and the Independent Advisors report
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What is the independent report that accompanies this Notice of Meeting?
The Company is required to provide shareholders with an independent report that
evaluates the merits of the proposed buyback. The report has been prepared by
Simmons Corporate Finance Limited. Shareholders are encouraged to read this carefully
and seek financial, legal and other advice as appropriate. The report should be read
together with this Notice of Meeting and in particular these explanatory notes setting out
the background to, the details and the effect of the proposed share buyback and the
change of control of JCR Associates that will be approved if the resolution is passed.
Why and how does the Takeovers Code apply here?
Rule 6(1) of the Takeovers Code (Takeovers Code Approval Order 2000) states that
unless an exception applies in rule 7, a person who holds or controls (a) no voting rights,
or less than 20% of the voting rights, in a code company (such as the Company) may not
become the holder or controller of an increased percentage of the voting rights in the
code company unless, after that event, that person and that person’s associates hold or
control in total not more than 20% of the voting rights in the code company , and (b)
20% or more of the voting rights in a code company may not become the holder or
controller of an increased percentage of the voting rights in the code company.
Rule 6(2)(a) states that a person and any other person or persons acting jointly or in
concert together become the holders or controllers of voting rights, that person is
deemed to have become the holder or controller of those voting rights.
The effect of the proposed buyback and cancellation of Franchise Brands’ shares is that
all shareholders other than Franchise Brands will proportionately increase their
shareholdings (see Table A above). Moreover, due to its proportionate increase, JCR
Associates will increase control of the Company from 63.95% to 67.31%. JCR Investment
as the controller of between 50% and 90% of the voting rights may increase control by
up to 5% over 12 months (also known as the ‘creep’ exception). However, that creep
exception is not available because it has already used a portion for the previous share
buy back and combined with the increase in control under the proposed share
buyback, the total increase of 6.73% would exceed the permitted 5% over 12 months.
The creep exception does not apply to CMJR Trust and E&P Foundation Trust.
Accordingly, the increase in control of JCR Associates from 63.95% to 67.31% would
breach rule 6(1) of the Takeovers Code in the absence of any applicable exception.
The proposed ordinary resolution seeks approval for the purposes of clause 4 of
Takeovers Code (Class Exemptions) Notice (No. 2) 2001 (the “Exemption Notice”) for the
proposed buyback. If approved, the above increase in control will be exempted from
rule 6(1) of the Takeovers Code.
What is the change in control if the proposed buyback is approved?
JCR Associates will be permitted to increase control of the Company from 63.95% to
67.31% if the proposed buyback is approved.
The increase in control will come about as a result of the cancellation of the 2,820,000
shares that will be bought back from Franchise Brands. Upon cancellation, all other
shareholders will increase their proportionate shareholding in the Company due to the
reduced number of shares on issue.
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What is the control position before the proposed buyback?
JCR Associates previously increased control from 60.58% to 63.95% as a result of the
previous share buyback of 3,143,355 shares from Franchise Brands on 17 July 2018.
Who is JCR Investment?
JCR Investment holds 30,480,573 shares in the Company as at 15 August 2018. The
registered holder is Mason Roberts Holdings Limited (“MRHL”). MRHL is a bare trustee
and also holds 2,742,900 shares for CMJR Trust (see below) and 6,586,309 shares for the
Mason Family Trust (see below). The JCR Investment Trust is a discretionary trust. The sole
director and shareholder of the two trustees JCR Capital Limited and 730 Trustee Limited
is Josef Roberts, the Company’s CEO.
Are the Mason interests associated persons?
While JCR Investment controls 53.96% of the Company’s shares through MRHL, the
majority shareholder with 70.47% of the Company’s total shares, 6,586,309 shares or
11.66% are controlled by the Mason Family Trust. JCR Investment is not an associate of
the Mason Family Trust despite both using MRHL as a bare trustee. There is no personal or
business relationship between the Mason Family Trust and JCR Investment or between Mr
Mason and Mr Roberts.
Who is CMJR Trust?
The CMJR Trust holds 2,742,900 shares in the Company as at 15 August 2018. The settlor is
Josef Roberts and the trustee is CMJR Trustee Limited. JCR Investment acknowledges
that the CMJR Trust is an associated person.
Who is E&P Foundation Trust?
The settlor of the E&P Foundation Trust is Josef Roberts. The trustee is E&P Foundation
Trustee Limited. E&P Foundation Trustee Limited’s sole independent director and
shareholder is Paul Devereux. The E&P Foundation Trust holds 2,900,000 shares in the
Company. The E&P Foundation Trust is a discretionary trust.
The Panel’s view on E&P Foundation Trust as an associated person
The Company understands that while the Takeovers Panel has formed the view that E&P
Foundation Trust appears to be an associated person of JCR Investment, JCR Investment
disagrees with the Panel view, but has pragmatically accepted the Panel’s view to
enable shareholder approval for the share buyback to be sought at the Annual General
Meeting. The result is that for the purposes of this Notice of Meeting, E&P Foundation
Trust is regarded as an associated person of JCR Investment.
Who is Franchise Brands LLC?
Franchise Brands is a company associated with the owners of the well-known Subway®
brand. Franchise Brands is a holding company, which through its subsidiaries, offers
franchising services. The company provides strategic planning, due diligence, and
partnership formation services. Franchise Brands, LLC was founded in 2005 and is based
in Milford, Connecticut.
Franchise Brands was created in 2005 with the support and guidance of the founders of
Subway restaurants, Fred DeLuca and Dr. Peter Buck, in order to invest in and offer
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guidance to small and mid-market companies with experienced management that are
seeking to expand their businesses. Subway restaurants is the largest single brand
restaurant chain in the world with over 40,000 franchised stores in more than 100
countries.
How did Franchise Brands get its shareholding?
In 2014, Franchise Brands acquired a 10% shareholding in the Company, holding
(following that transaction) 5,963,355 shares. Franchise Brands acquired those shares
through a subscription of new shares and a purchase of shares from MRHL, the
Company’s largest shareholder. The price paid by Franchise Brands for those shares was
NZ$1.35 per share. This transaction was the subject of shareholder approval at an
extraordinary meeting in 2014.
The Company and Franchise Brands entered into an agreement in which it was intended
that Franchise Brands would collaborate with the Company to grow the Company’s
business by providing knowledge and support as well as global development
opportunities, including in the United States where the Company planned to open
restaurants.
Why is Franchise Brands selling?
In 2016, it was announced that following the sudden passing of Subway Founder Fred
Deluca, the collaboration agreement between the Company and Franchise Brands
would end. With the ending of that agreement and therefore the end of the rationale
for the strategic stake in the Company, the Company has been in discussions with
Franchise Brands for the purchase of its shares. As a result of those discussions, an
agreement was reached on 17 April 2018 under which Franchise Brands would sell its
shareholding in the Company for a total price of US$1.5 million (approximately US$0.25
per share) subject to obtaining the necessary approvals, including shareholder approval.
How was the original proposal revised?
At the time of the announcement on 11 June 2018, it was proposed that the Company
would buy back and cancel 3,143,355 shares and the remaining 2,820,000 shares would
be purchased by JCR Investment through its controlling interest in the largest shareholder
MRHL and the E&P Foundation Trust.
This was due to the Board evaluating the Company’s cash position at the time, taking
into account the Company’s future working capital requirements. The Board concluded
that it was comfortable with the initial buyback and with JCR Investment purchase of the
balance. However, since then, payment terms have been negotiated with Franchise
Brands allowing the purchase to be paid in four instalments over an 8-month period. The
agreed payment instalments are as follows;
10
th
September 2018 – US$235,000.25
5
th
December 2018 - US$115,000.00
28
th
February 2019 - US$180,000.00
28
th
April 2019 - US$179,332.00
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The facilitation of these payments terms by Franchise Brands has now enabled the Board
to recommend the proposed buyback of 2,820,000 shares by the Company. The Board is
very appreciative of Franchise Brands’ accommodation of these payment terms.
What is Franchise Brands current shareholding?
Franchise Brands currently holds 2,820,000 fully paid ordinary shares in the Company. The
proposed buyback is for all these remaining shares. If the share buyback is approved,
Franchise Brands will no longer have any shareholding in the Company. Franchise
Brands sold 3,143,355 shares to the Company under the previous share buyback
completed on 17 July 2018. These two parcels comprise the 10% shareholding in the
Company that Franchise Brands has held since 2014.
What was the previous share buyback?
On 11 June 2018, the Company announced it would buy back and cancel 3,143,355
shares from Franchise Brands between 11 July 2018 and 31 July 2018. The shares were
purchased on 17 July 2018 for a total price of US$790,667.75(approximately US$0.25 per
share). The buyback was funded from the Company’s cash reserves.
The reasons for the buyback given by the Board at the time were that:
a. The buyback is consistent with the termination of the collaboration
agreement, and the ending of the strategic alliance, with Franchise
Brands;
b. The buyback presents an opportunity to deliver a benefit to shareholders
through the cancellation of the shares, a reduction in the total number of
shares on issue, and the increase in each remaining shareholder’s
proportionate shareholding that will follow; and
c. The buyback price is at a discount to the current market price, and the
price paid by Franchise Brands, for the shares.
How will the purchase be funded?
The proposed share buyback will be funded with cash reserves, similar to the first
buyback in July 2018, but in paid in instalments. Given the new payment terms provided
by Franchise Brands, the Board is comfortable the Company will have sufficient funds for
future growth, continued development and the purchase of the 2,820,000 shares. As at
the 31 March 2018, the Company had $6.3M in cash reserves and no debt.
The differences between the first buyback and the one now proposed?
While the number of shares differs, the price per share is the same. The payment is cash
from the Company’s cash reserves in both cases. However, the payment will be in
instalments as described above. Moreover, in the opinion of the Board, the reasons for
the two buybacks are largely the same. However, only the now proposed share
buyback will require shareholder approval.
What was the effect of that on shareholdings generally and specifically control?
The previous share buyback reduced the number of shares on issue from 59,633,550 to
56,490,195.
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As a result, JCR Associates increased control from 60.58% to 63.95%. JCR Investment was
permitted to increase its control because this increase was less than 5% over a 12 month
period under the so-called ‘creep’ exception available to it under the Takeovers Code.
Under the share buyback exemption in clause 5 of the Exemption Notice, CMJR Trust
and E&P Foundation Trust were each required to sell 144,582 shares and 152,862 shares
respectively so that their control percentages are returned to the same levels
respectively as they were before the previous share buyback and not to exercise any
right to vote in respect of those shares. To facilitate this, JCR Investment will purchase
those shares before the proposed share buyback occurs, referred to earlier as the
Clause 5 Exemption Purchase. These sales once completed will affect the shareholdings
of those parties with JCR Investment’s shareholding increasing to 57.35% as shown in
Table A above. These sales will not affect the level of control of JCR Associates sought to
be approved under the proposed shareholders resolution which remains at 67.31%. If
the resolution is passed to approve the increased level of control of JCR Associates, the
resulting increase in JCR Investment’s shareholding to 57.35% will be permitted.
Why was shareholder approval not necessary?
The previous share buyback did not require shareholder approval under the Companies
Act 1993. The share buyback did not require shareholder approval under the Takeovers
Code because JCR Associates was permitted to increase resulting control to 63.95%
under the so-called ‘creep’ exception. The increase in control of each of CMJR Trust
and E&P Foundation Trust were exempted by clause 5 of the Exemption Notice provided
they complete the Clause 5 Exemption Purchase.
How does the price compare?
The buyback price is at a discount to the current market price, and the price paid by
Franchise Brands in 2014, for the entire parcel of shares.
Franchise Brands acquired its shares in 2014 for NZ$1.35 per share.
The current share price is NZ$0.67 as at 13 August 2018.
What are the Board’s reasons for the proposed share buy back?
They are largely the same as for the previous share buyback. Namely:
a. The buyback is consistent with the termination of the collaboration
agreement, and the ending of the strategic alliance, with Franchise
Brands;
b. The buyback presents an opportunity to deliver a benefit to the
Company’s shareholders through the cancellation of the shares, a
reduction in the total number of shares on issue, and the increase in each
remaining shareholder’s proportionate shareholding that will follow;
c. The buyback price is at a discount to the current market price, and the
price paid by Franchise Brands, for the shares; and
d. The Board is of the view that the newly negotiated payment terms of the
buyback make this an attractive and achievable transaction for the
Company.
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The shares to be purchased from Franchise Brands will be cancelled, reducing the total
number of shares on issue from 56,490,195 to 53,670,195. As such, every other
shareholder will benefit by gaining an increase in their proportionate equity holding. This
benefit arises at a sale price below that at which the shares have been trading.
Exemption Notice disclosure requirements
The Exemption Notice requires this Notice of Meeting to contain, or be accompanied by,
the following:
(a) full particulars of the buyback are set out above:
(b) the person who holds or controls voting securities and is relying on the buyback
exemption is each of JCR Investment, CMJR Trust and E&P Foundation Trust (together
“JCR Associates”):
(c) the following particulars of the voting securities that may, if the resolution is carried,
be acquired by the Company under the buyback:
(i) the maximum number (the approved maximum number) of its own voting
securities that the Company could acquire under the buyback is 2,820,000:
(ii) the percentage of all voting securities on issue that the approved maximum
number represents is 4.99%:
(iii) the maximum percentage (the approved maximum percentage) of all
voting securities on issue that each of the JCR Associates individually could hold
or control if the Company acquired the approved maximum number of voting
securities is JCR Investment 57.35%, CMJR Trust 4.84% and E&P Foundation Trust
5.12% (total 67.31%):
(iv) the maximum percentage of all voting securities on issue that each of the
JCR Associates individually, excluding JCR Associates’ exempt associates,
could hold or control, in aggregate, if the Company acquired the approved
maximum number of voting securities is JCR Investment 57.35%, CMJR Trust
4.84% and E&P Foundation Trust 5.12% (total 67.31%):
(v) the maximum percentage of all voting securities on issue that JCR
Associates and all JCR Associates’ associates could hold or control, in
aggregate, if the Company acquired the approved maximum number of
voting securities is 67.31%:
(d) the consideration for the buyback, or the manner in which the consideration will
be determined, and when it will be payable is a total price of US$709,332.25 payable
in 4 instalments over 8 months:
(e) the reasons for the buyback are set out above:
(f) the increase in JCR Associates’ voting control that would result from the buyback
would, if approved, be permitted as an exception to rule 6(1) of the Code in reliance
on the buyback exemption in clause 4 of the Exemption Notice:
(g) please refer to the accompanying report from an independent adviser, in relation
to the buyback, that complies with rule 18 of the Code as if—
▪ (i) references in that rule to an acquisition under rule 7(c) of the
Code were references to the buyback by the Company made in
accordance with the buyback exemption; and
▪ (ii) the references to a notice of meeting were references to the
notice of meeting referred to in this clause:
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(h) The Board (except Josef Roberts) recommends approval of the proposed share buy
back for the reasons set out above. See pages 8-9 of the accompanying report from an
independent adviser. Josef Roberts has abstained from making any recommendation
to shareholders on the basis of his interest in the proposed buy back:
(i) the assumptions on which the particulars referred to in paragraph (c) are based,
are set out under the heading Exemption Notice Assumptions below:
(j) the calculation date is 15 August 2018.
Exemption Notice assumptions
The following assumptions apply for the purposes of providing the particulars of voting
securities, as specified in clause 3(c) of the Exemption Notice:
(a) that the number of voting securities in the Company is the number of voting
securities on issue on the calculation date:
(b) that there is no change in the total number of voting securities on issue between
the calculation date and the end of the buyback period, other than as a result of the
buyback:
(c) that JCR Associates and its associated persons do not participate in the buyback:
(d) that the Company acquires the approved maximum number of its own voting
securities:
(e) there are no other assumptions that are reasonably necessary to ensure that
shareholders are provided with the material information required for them to be able
to determine whether to approve the resolution.
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PROXIES AND REPRESENTATIVES
All shareholders are entitled to attend the Company’s Annual Meeting.
Any shareholder of the Company entitled to attend and vote at the meeting may
appoint another person as his / her proxy to attend and vote instead of him / her. A
proxy need not be a shareholder and may be appointed online or by completing the
form accompanying this Notice of Meeting.
The proxy must be lodged online at www.investorvote.co.nz or, if you complete the form,
received by the Company’s share registry, Computershare Investor Services Limited at
either Private Bag 92119, Auckland 1142 or at Level 2, 159 Hurstmere Road, Takapuna,
Auckland so as to be received no later than 2.00pm on Tuesday 28th August 2018. If you
wish, you may appoint “the Chairman of the Meeting” as your proxy.
Any corporation that is a shareholder of the Company may appoint a person as its
representative to attend the meeting and vote on its behalf, in the same manner as that
in which it could appoint a proxy.
You may either direct your proxy how to vote for you, or you may give your proxy
discretion to vote how he / she sees fit. If you wish to give your proxy discretion you
should mark the appropriate boxes on the proxy form. If you do not mark any box for a
particular resolution, then your proxy will vote or abstain from voting as he or she thinks fit.
Josef Roberts, who is associated with JCR Investment, is not permitted to vote any
undirected proxies.
---
www.simmonscf.co.nz
Burger Fuel Worldwide Limited
Independent Adviser’s Report
In Respect of the Buyback of
2,820,000 Shares from
Franchise Brands, LLC
August 2018
Statement of Independence
Simmons Corporate Finance Limited confirms that it:
has no conflict of interest that could affect its ability to provide an unbiased report; and
has no direct or indirect pecuniary or other interest in the proposed transaction considered in the report,
including any success or contingency fee or remuneration, other than to receive the cash fee for providing
this report.
Simmons Corporate Finance Limited has satisfied the Takeovers Panel, on the basis of the material provided to the
Panel, that it is independent under the Takeovers Code for the purposes of preparing this report.
Burger Fuel Worldwide Limited Independent Adviser’s Report
Index
Section Page
1. Introduction ........................................................................................................................ 1
2. Evaluation of the Merits of the Second FB Buyback .......................................................... 8
3. Profile of BurgerFuel ........................................................................................................ 17
4. Sources of Information, Reliance on Information, Disclaimer and Indemnity .................. 24
5. Qualifications and Expertise, Independence, Declarations and Consents ...................... 26
Burger Fuel Worldwide Limited Page 1 Independent Adviser’s Report
1. Introduction
1.1 Background
Burger Fuel Worldwide Limited (BurgerFuel or the Company) owns and franchises
82 Burger Fuel gourmet burger restaurants in New Zealand, Australia, the Middle
East and the United States of America (USA) and owns the intellectual property rights
to the Winner Winner New Zealand based gourmet chicken concept.
The BurgerFuel business was founded by Chris Mason in 1995. Josef Roberts
invested in the business in 2003.
The Company’s shares were listed on the alternative market (NZAX) operated by
NZX Limited (NZX) on 27 July 2007 following an initial public offering (IPO) that raised
$8 million.
BurgerFuel’s market capitalisation was $38 million as at 9 August 2018 and its
audited shareholders’ equity was $13 million as at 31 March 2018.
A profile of BurgerFuel is set out in section 3.
1.2 Buy Back of Shares from Franchise Brands, LLC
Franchise Brands, LLC
Franchise Brands, LLC (Franchise Brands) is a company incorporated in the United
States of America which offers franchising services. It was created in 2005 with the
support and guidance of the founders of SUBWAY
®
restaurants.
On 26 February 2014, BurgerFuel’s shareholders approved the Company entering
into a collaboration agreement with Franchise Brands and Franchise Brands
acquiring 5,963,355 ordinary shares in BurgerFuel via:
the issue of 4,357,298 ordinary shares at an issue price of $1.35 per share
the acquisition of 1,606,057 ordinary shares from Mason Roberts Holdings
Limited (MRHL) at a price of $1.35 per share.
Up to 17 July 2018, Franchise Brands’ shareholding represented 10.00% of
BurgerFuel’s total shares on issue.
Termination of Collaboration Agreement
On 22 August 2016, following the sudden passing of SUBWAY® founder Fred
Deluca, the collaboration agreement between BurgerFuel and Franchise Brands was
terminated.
With the termination of the collaboration agreement, BurgerFuel entered into
discussions with Franchise Brands in respect of the purchase of its BurgerFuel
shares.
As a result of those discussions, Franchise Brands agreed to sell its shareholding in
BurgerFuel for a total price of US$1.5 million (approximately US$0.25 per share,
equating to approximately $0.37 per share at that time).
Burger Fuel Worldwide Limited Page 2 Independent Adviser’s Report
Initial FB Buyback
BurgerFuel bought back and cancelled 3,143,355 ordinary shares from Franchise
Brands for US$790,667.75 (approximately US$0.25 per share / $0.37 per share) on
17 July 2018 (the Initial FB Buyback).
Second FB Buyback
BurgerFuel now intends to buy back and cancel the remaining 2,820,000 ordinary
shares held by Franchise Brands for a total price of US$709,332.25 (approximately
US$0.25 per share / $0.37 per share) (the Second FB Buyback), subject to
shareholder approval.
1.3 JCR Associates
Mason Roberts Holdings Limited
MRHL is BurgerFuel’s largest shareholder. It currently holds 39,809,782 ordinary
shares, representing 70.47% of the Company’s shares on issue.
MRHL was incorporated on 18 August 2011. It is a special purpose entity that was
formed by Chris Mason and Josef Roberts for the purpose of holding their respective
family trust’s shareholdings in BurgerFuel under a bare trust, as nominee.
The shares in MRHL are owned equally by Mr Mason and Mr Roberts. Mr Roberts
is the sole director of MRHL.
As a bare trustee, MRHL does not control the voting rights associated with the
39,809,782 shares. The voting rights are controlled by the beneficial owners of the
shares who are set out below.
Beneficial Owners of the Shares Held by MRHL
No. of Shares Voting Rights
1
JCR Investment Trust 30,480,573 53.96%
CMJR Trust 2,742,900 4.86%
Mason Family Trust 6,586,309 11.66%
39,809,782 70.47%
1 % of total voting rights in the Company
Source: BurgerFuel
JCR Investment Trust
The JCR Investment Trust (the JCR Trust) is a discretionary trust whose trustees
are JCR Capital Limited and 730 Trustee Limited. The sole director and shareholder
of both trustees of the JCR Trust is Josef Roberts.
CMJR Trust
The CMJR Trust is a discretionary trust whose trustee is CMJR Trustee Limited
(CMJRTL). The shares in CMJRTL are owned equally by Mr Mason and Mr Roberts,
who are both directors of the company.
Burger Fuel Worldwide Limited Page 3 Independent Adviser’s Report
Mason Family Trust
The Mason Family Trust is a discretionary trust whose beneficiaries are Chris
Mason’s family members.
The trustees of the Mason Family Trust are Chris Mason and Christopher Mills.
E&P Foundation Trustee Limited
E&P Foundation Trustee Limited (E&P) currently holds 2,900,000 ordinary shares in
BurgerFuel, representing 5.13% of the Company’s shares on issue.
E&P is owned by Paul Devereux. Mr Devereux was the former consultant company
secretary and corporate counsel for BurgerFuel.
E&P is the sole trustee of the E&P Foundation Trust (the E&P Trust). The E&P Trust
is a discretionary trust whose beneficiaries are a range of persons and charitable
organisations to which Mr Roberts, in settling the trust, wished to empower E&P to
make dispositions from time to time at the trustee’s sole and unfettered discretion.
The discretionary beneficiaries of the E&P Trust are not among the discretionary
beneficiaries under the JCR Trust or the CMJR Trust (and vice versa).
JCR Associates
For the purposes of the Takeovers Code (the Code), it is assumed that the JCR
Trust, the CMJR Trust and E&P are associates (as defined under the Code).
We refer to the JCR Trust, the CMJR Trust and E&P collectively as the JCR
Associates.
The JCR Associates collectively beneficially own 36,123,473 ordinary shares in
BurgerFuel at present, representing 63.95% of the Company’s shares on issue.
The Mason Family Trust is not deemed to be an associate of the JCR Associates for
the purposes of the Code.
Clause 5 Exemption Purchase
As discussed in section 1.5, the Code requires that the CMJR Trust and E&P reduce
their control of voting rights by 0.26% and 0.27% respectively within 6 months of the
Initial FB Buyback. This will be effected by the JCR Trust acquiring 144,582 shares
from the CMJR Trust and 152,862 shares from E&P (the Clause 5 Exemption
Purchase). The Clause 5 Exemption Purchase must be completed prior to the
Second FB Buyback being completed.
1.4 Impact on Voting Rights
Initial FB Buyback
The Initial FB Buyback resulted in:
the Company’s total shares on issue decreasing from 59,633,550 shares to
56,490,195 shares
the 60.58% of the voting rights held or controlled (as applicable) by the JCR
Associates increasing by 3.37% to 63.95%
Burger Fuel Worldwide Limited Page 4 Independent Adviser’s Report
the 29.42% of the voting rights collectively controlled by the Company’s
shareholders not associated with Franchise Brands or the JCR Associates (the
Non-associated Shareholders) increasing by 1.64% to 31.06%
Franchise Brands decreasing its control of voting rights in BurgerFuel from
10.00% to 4.99%.
Impact of Initial FB Buyback on Voting Rights Levels
Pre Initial FB Buyback Initial FB BuybackCurrent
2
No. of
Shares
% No. of Shares No. of Shares %
JCR Trust 30,480,573 51.11% 297,444
1
30,778,017 54.48%
CMJR Trust 2,742,900 4.60% (144,582)
1
2,598,318 4.60%
E&P
2
2,900,000 4.86% (152,862)
1
2,747,138 4.86%
JCR Associates 36,123,473 60.58% - 36,123,473 63.95%
Non-associated Shareholders 17,546,722 29.42% 17,546,722 31.06%
Franchise Brands 5,963,355 10.00% (3,143,355) 2,820,000 4.99%
Total
59,633,550 100.00% (3,143,355) 56,490,195 100.00%
1 Clause 5 Exemption Purchase
2 After the Clause 5 Exemption Purchase
Second FB Buyback
The Second FB Buyback will result in:
the Company’s total shares on issue decreasing from 56,490,195 shares to
53,670,195 shares
the 63.95% of the voting rights held or controlled (as applicable) by the JCR
Associates increasing by 3.36% to 67.31%
the 31.06% of the voting rights collectively controlled by the Non-associated
Shareholders increasing by 1.63% to 32.69%
Franchise Brands holding no shares in the Company.
Impact of Second FB Buyback on Voting Rights Levels
Current
1
Second FB Buyback Post Second FB Buyback
No. of
Shares
%
No. of
Shares
No. of
Shares
%
JCR Trust 30,778,017 54.48% 30,778,017 57.35%
CMJR Trust 2,598,318 4.60% 2,598,318 4.84%
E&P 2,747,138 4.86% 2,747,138 5.12%
JCR Associates 36,123,473 63.95% 36,123,473 67.31%
Non-associated Shareholders 17,546,722 31.06% 17,546,722 32.69%
Franchise Brands 2,820,000 4.99% (2,820,000) - -
Total
56,490,195 100.00% (2,820,000) 53,670,195 100.00%
1 After the Clause 5 Exemption Purchase
Burger Fuel Worldwide Limited Page 5 Independent Adviser’s Report
1.5 Regulatory Requirements
BurgerFuel is a code company as defined by the Code and is subject to the provisions
of the Code.
Rule 6 of the Code prohibits a person who holds or controls:
no voting rights, or less than 20% of the voting rights, in a code company from
becoming the holder or controller of an increased percentage of the voting
rights in the code company unless, after that event, that person and that
person’s associates hold or control in total not more than 20% of the voting
rights in the code company
20% or more of the voting rights in a code company from becoming the holder
or controller of an increased percentage of the voting rights in the code
company
unless the person and that person’s associates comply with exceptions to this
fundamental rule.
When a company buys back and cancels its shares, the percentage holding of any
shareholder that does not participate in the buyback will increase. Consequently, if
a company with a shareholder holding or controlling in excess of 20% of the voting
rights (or a shareholder holding or controlling near to 20% of the voting rights) wishes
to undertake a share buyback, the shareholder needs to rely upon an exemption to
the Code.
The Takeovers Code (Class Exemptions) Notice (No 2) 2001, as amended by the
Takeovers Code (Class Exemptions – Buybacks and Rule 16(b)) Amendment Notice
2010 (the Buyback Exemptions), sets out a general exemption for share buybacks.
Clause 4 of the Buyback Exemptions provides an exemption for a shareholder
holding or controlling (alone or with their associates):
less than 20% of the voting rights in a code company to increase its holding or
control of voting rights beyond 20%
20% or more of the voting rights in a code company to increase its holding or
control of voting rights
via a share buyback, provided the buyback has been approved by an ordinary
resolution of shareholders (excluding shareholders who will rely on clause 4 of the
Buyback Exemptions (and their associates)).
Clause 5 of the Buyback Exemptions provides an exemption that does not require
shareholder approval, provided the shareholder reduces its percentage holding to
the lower of 20% or its pre-buyback levels within 6 months.
As set out in section 1.4, the Initial FB Buyback resulted in the JCR Associates
increasing their collective voting rights by 3.37% from 60.58% to their current level of
63.95%. This included the JCR Trust increasing its control of voting rights by 2.84%
from 51.11% to 53.96%.
The JCR Trust was permitted to increase its voting rights to 53.96% without
shareholder approval under Rule 7(e) of the Code (the Creep Provisions). The
Creep Provisions permit a shareholder who holds or controls more than 50% but less
than 90% of the voting rights in a code company to increase their voting rights by a
maximum of 5% over a 12 month period without the need for shareholder approval.
Burger Fuel Worldwide Limited Page 6 Independent Adviser’s Report
The Creep Provisions do not apply to that shareholder’s associates. Therefore, the
CMJR Trust and E&P cannot increase their control of voting rights utilising the Creep
Provisions. As the Initial FB Buyback resulted in the CMJR Trust and E&P increasing
their control of voting rights by 0.26% and 0.27% respectively, they need to apply the
exemption under Clause 5 of the Buyback Exemptions. This will be effected via the
Clause 5 Exemption Purchase whereby the JCR Trust will acquire 144,582 shares
from the CMJR Trust and 152,862 shares from E&P prior to the Second FB Buyback
being completed.
The JCR Trust is permitted to undertake the Clause 5 Exemption Purchase under
the Creep Provisions without the need for shareholder approval.
The Second FB Buyback will result in the JCR Associates increasing their collective
voting rights by a further 3.36% from 63.95% to 67.31%.
The cumulative impact of the Initial FB Buyback and the Second FB Buyback is a
6.73% increase in the JCR Associates’ control of voting rights from 60.58% before
the Initial FB Buyback to 67.31% after the Second FB Buyback. The JCR Trust’s
control of voting rights will increase by 6.24% from 51.11% before the Initial FB
Buyback to 57.35% after the Clause 5 Exemption Purchase and the Second FB
Buyback. This exceeds the maximum 5% increase permitted under the Creep
Provisions.
Accordingly, the Non-associated Shareholders will vote on an ordinary resolution at
the Company’s annual meeting on 30 August 2018 in respect of the Second FB
Buyback and permitting the JCR Associates to retain the increase in their voting
rights in the Company as a result of the Second FB Buyback up to 67.31%
(resolution 3 – the Buyback Resolution). This means that the CMJR Trust and E&P
will not be required to sell down the increase in their voting rights arising from the
Second FB Buyback.
In accordance with Clause 2(2) of Schedule 1 of the Buyback Exemptions, the JCR
Associates are not permitted to vote on the Buyback Resolution.
Clause 3(g) of Schedule 1 of the Buyback Exemptions requires that the notice of
meeting containing the resolution in respect of the Second FB Buyback must include
or be accompanied by an Independent Adviser’s Report that complies with Rule 18
of the Code as if:
references in that rule to an acquisition under Rule 7(c) of the Code were
references to the buyback by the code company made in accordance with the
buyback exemption and
the references to a notice of meeting were references to the notice of meeting
referred to in this clause.
1.6 Purpose of the Report
The directors of BurgerFuel not associated with the JCR Associates, being Peter
Brook and Alan Dunn (the Non-associated Directors), have engaged Simmons
Corporate Finance Limited (Simmons Corporate Finance) to prepare an
Independent Adviser’s Report on the merits of the Second FB Buyback and of the
JCR Associates retaining the increase in their voting rights in the Company.
Simmons Corporate Finance was approved by the Takeovers Panel on 25 July 2018
to prepare the Independent Adviser’s Report.
Burger Fuel Worldwide Limited Page 7 Independent Adviser’s Report
Simmons Corporate Finance issues this Independent Adviser’s Report to the
Non-associated Directors for the benefit of the Non-associated Shareholders and to
assist them in forming their own opinion on voting on the Buyback Resolution.
We note that each shareholder’s circumstances and objectives are unique.
Accordingly, it is not possible to report on the merits of the Second FB Buyback and
of the JCR Associates retaining the increase in their voting rights in relation to each
shareholder. Our advice and opinions are necessarily general in nature.
This Independent Adviser’s Report is not to be used for any other purpose without
our prior written consent.
1.7 Currency References
All references to $ are references to New Zealand dollars unless specified as a
foreign currency (eg US$).
Burger Fuel Worldwide Limited Page 8 Independent Adviser’s Report
2. Evaluation of the Merits of the Second FB Buyback
2.1 Basis of Evaluation
Clause 3(g) of Schedule 1 of the Buyback Exemptions requires an evaluation of the
merits of the Second FB Buyback and of MRHL retaining the increase in its voting
rights in the Company, having regard to the interests of the Non-associated
Shareholders.
There is no legal definition of the term merits in either the Code or in any statute
dealing with securities or commercial law in New Zealand.
In the absence of an explicit definition of merits, guidance can be taken from:
the Takeovers Panel Guidance Note on Independent Advisers and the
Takeovers Code dated 1 March 2018
definitions designed to address similar issues within New Zealand regulations
which are relevant to the proposed transaction
overseas precedents
the ordinary meaning of the term merits.
We are of the view that an assessment of the merits of the Second FB Buyback and
of MRHL retaining the increase in its voting rights in the Company should focus on:
the rationale for the Second FB Buyback
the terms and conditions of the Second FB Buyback
the financial impact of the Second FB Buyback
the impact of the Second FB Buyback on the control of the Company
the impact of the Second FB Buyback on BurgerFuel’s share price
the benefits and disadvantages to the Non-associated Shareholders of the
Second FB Buyback
the implications if the Buyback Resolution is not approved.
Our opinion should be considered as a whole. Selecting portions of the evaluation
without considering all the factors and analyses together could create a misleading
view of the process underlying the opinion.
2.2 Summary of the Evaluation of the Merits of the Second FB Buyback
In our opinion, after having regard to all relevant factors, the positive aspects
of the Second FB Buyback outweigh the negative aspects of the JCR
Associates retaining the increase in their voting rights as a result of the Second
FB Buyback from the perspective of the Non-associated Shareholders.
Our evaluation of the merits is set out in detail in sections 2.3 to 2.9. In summary,
the key factors leading to our opinion are:
the rationale for the Second FB Buyback is sound. It arises as a consequence
of BurgerFuel and Franchise Brands terminating the collaboration agreement
and follows the Initial FB Buyback on 17 July 2018
Burger Fuel Worldwide Limited Page 9 Independent Adviser’s Report
the Initial FB Buyback did not require shareholder approval. The Second FB
Buyback requires shareholder approval because the increase in the JCR
Associates’ level of voting rights exceeds the limit permitted under the Creep
Provisions
the Second FB Buyback will result in all of the Company’s shareholders’
interests in BurgerFuel increasing by 5.25% in proportionate terms (eg a
shareholder who currently holds a 10.00% shareholding will hold a 10.525%
shareholding after the Second FB Buyback)
the terms of the Second FB Buyback are reasonable:
the Second FB Buyback is at a price of approximately US$0.25 per share
/ $0.37 per share, which is the same price as the Initial FB Buyback and is
at a significant discount to BurgerFuel’s current share price
the consideration will be paid to Franchise Brands in 4 instalments over a
period of 8 months up to 28 April 2019
the financial impact of the Second FB Buyback is moderate. Total equity will
reduce by approximately $1.0 million, with an equivalent decrease in cash on
hand. Earnings per share (EPS) will decrease by 7% and net tangible assets
(NTA) per share will decrease by 6%
the Second FB Buyback will not increase the JCR Associates’ ability to
influence the outcome of shareholder voting to any significant degree. The
JCR Associates already hold a significant level of influence over the outcome
of shareholder voting. The Second FB Buyback will increase the JCR
Associates’ control of voting rights by 3.36%
as the Second FB Buyback is at a price significantly lower than BurgerFuel’s
current share price, it should have a positive impact on the Company’s share
price. In theory, the Second FB Buyback should increase the Company’s share
price by approximately 3% (all other things being equal)
the Second FB Buyback is unlikely to have any significant impact on the liquidity
of the shares held by the Non-associated Shareholders
the Second FB Buyback is unlikely to reduce the attraction of BurgerFuel as a
takeover target
in the event of the Buyback Resolution not being approved, the Second FB
Buyback will not proceed. Franchise Brands has not indicated what it would
do with its shares in such circumstances. The Non-associated Directors could
subsequently decide to proceed with the Second FB Buyback without seeking
shareholder approval but the JCR Associates would be required to collectively
sell down 928,838 shares to return their percentage holding to the maximum
level of 65.58% permitted under the Creep Provisions within 6 months of the
increase. The forced sale of 1.73% of the Company’s shares in a relatively
short timeframe would likely place downward pressure on the Company’s share
price.
Burger Fuel Worldwide Limited Page 10 Independent Adviser’s Report
2.3 Rationale for the Second FB Buyback
Directors’ Rationale
The Initial FB Buyback and the Second FB Buyback have arisen due to the
termination of the collaboration agreement between BurgerFuel and Franchise
Brands in August 2016 and the resulting agreement for Franchise Brands to sell its
shareholding in BurgerFuel for a total price of US$1.5 million (approximately US$0.25
per share, equating to approximately $0.37 per share).
BurgerFuel bought back and cancelled 3,143,355 ordinary shares from Franchise
Brands for a total price of US$790,667.75 under the Initial FB Buyback on 17 July
2018.
BurgerFuel now intends to buy back and cancel the remaining 2,820,000 ordinary
shares held by Franchise Brands for a total price of US$709,332.25, subject to
shareholder approval. The Second FB Buyback would take place within 10 days of
shareholder approval.
The Company’s directors are of the view that the Second FB Buyback (as well as the
Initial FB Buyback) presents an opportunity to deliver a benefit to all shareholders
through the purchase of the shares at a discount to the current market price, the
cancellation of the shares, a reduction in the total number of shares on issue and the
increase in each remaining shareholder’s proportionate shareholding that will follow.
In addition, the negotiated payment terms for the Second FB Buyback are attractive
for the Company.
Finance Theory
The benefits of share buybacks have long been the focus of academic research and
practitioners' debate. It is generally accepted that share buybacks can affect value
as follows:
by supporting the share price
by being an efficient use of capital
by creating a more efficient capital structure.
In reality however, the impacts can be difficult to quantify.
Supporting the Share Price
There is some evidence to suggest that a share buyback has a signalling effect to
the market. A share buyback could indicate to the market that a company's
management is so confident of the company's prospects that it believes the best
investment the company can make is in its own shares. On the other hand, the
announcement of a share buyback has in instances been deemed an admission that
the company cannot identify any other value creating opportunities in which to invest
its capital.
A share buyback can also act to support a company's share price by creating
buy-side demand.
Efficient use of Capital
Companies often undertake share buybacks when they are of the view that the
market is undervaluing their shares, therefore buying back those shares at the market
price is an efficient use of the company’s capital.
Burger Fuel Worldwide Limited Page 11 Independent Adviser’s Report
Capital Structure
The share buyback is effectively an exchange of equity for debt, thereby increasing
a company’s leverage. In finance theory, increasing leverage can provide several
benefits, such as:
interest payments on debt are tax deductible, which means that the after-tax
cost of debt is generally below shareholders' expected return on equity, hence
reducing the company's average cost of capital
debt supposedly serves as a discipline for a company's managers. Unlike
equity, the need to pay cash to bondholders and banks prevents managers
from investing in projects that earn returns below the company's cost of capital.
Conclusion
Having considered all of the above, we are of the view that the rationale for the
Second FB Buyback is sound.
2.4 Terms of the Second FB Buyback
The key terms of the Second FB Buyback are:
the Company will acquire 2,820,000 shares from Franchise Brands
the buy back will occur within 10 days of shareholder approval
the Company will pay US$709,332.25 in total for the shares (representing a
price of approximately US$0.25 per share / $0.37 per share), paid in
4 instalments:
10 September 2018: US$235,000.25
5 December 2018: US$115,000.00
28 February 2019: US$180,000.00
28 April 2019: US$179,332.00
the Company will cancel the shares acquired under the Second FB Buyback.
We consider the terms of the Second FB Buyback to be reasonable:
the buyback price is the same price as under the Initial FB Buyback
the buyback price is significantly lower than the Company’s current share price
all shareholders will benefit equally from the cancellation of the shares.
The Second FB Buyback New Zealand dollar equivalent price of $0.37 per share is
at a 45% discount to the Company’s current share price and is at a discount of
between 45% and 60% to the Company’s volume weighted average share price
(VWAP) over the past year (measured over different periods of between one month
and one year).
Burger Fuel Worldwide Limited Page 12 Independent Adviser’s Report
The Second FB Buyback will result in all of the Company’s shareholders’ (ie the
Non-associated Shareholders’ and the JCR Associates’) interests in BurgerFuel
increasing by 5.25% in proportionate terms. By way of example, a shareholder who
currently holds a 10.00% shareholding will hold a 10.525% shareholding after the
Second FB Buyback).
2.5 Financial Impact of the Second FB Buyback
A summary of BurgerFuel’s recent financial performance and financial position is set
out in sections 3.7 and section 3.8.
The illustrative financial impact of the Second FB Buyback on the Company’s
financial results for the year ended 31 March 2018 is set out below, based on the
following assumptions:
the Initial FB Buyback was completed at a cost of $1,163,775
BurgerFuel repurchases 2,820,000 shares at a price of $0.37 per share,
amounting to $1,043,400
the Initial FB Buyback and the Second FB Buyback are funded from
BurgerFuel’s cash on hand
the 2 buy backs effectively occurred on 1 April 2017, so that BurgerFuel did not
receive interest on the consideration paid to Franchise Brands for the full year
ended 31 March 2018
an interest rate of 1.25% on the consideration paid to Franchise Brands,
resulting in decreased annual interest received of approximately $10,000 (post
tax) in respect of the Initial FB Buyback and $9,000 (post-tax) in respect of the
Second FB Buyback.
Illustrative Financial Impact of the Second FB Buyback
Year to
31 Mar 18
(Audited)
Initial FB
Buyback
Illustrative
Post Initial
FB
Buyback
Second FB
Buyback
Illustrative
Post
Second FB
Buyback
Net (loss) attributable to shareholders ($000) (463) (10) (473) (9) (483)
EPS ($) ($0.008) ($0.008) ($0.009)
Total equity ($000) 13,203 (1,164) 12,039 (1,043) 10,996
NTA per share ($) $0.18 $0.17 $0.16
Shareholders’ equity / total assets 84% 83% 82%
Burger Fuel Worldwide Limited Page 13 Independent Adviser’s Report
The illustrative analysis shows that the Second FB Buyback would result in:
EPS decreasing by 7% from negative $0.008 to negative $0.009
NTA per share reducing by 6% from $0.17 to $0.16
shareholders’ equity / total assets decreasing from 83% to 82%.
2.6 Impact on Control
Capital Structure and Shareholders
BurgerFuel currently has 56,490,195 fully paid ordinary shares on issue held by 2,558
shareholders.
The names, number of shares and percentage holding of the 10 largest shareholders
as at 31 July 2018 are set out in section 3.6.
The Second FB Buyback will result in an increase in the JCR Associates’ and the
Non-associated Shareholders’ respective percentage of votes held or controlled,
even though they will not increase the actual number of shares they hold. All
shareholders’ interests in the Company will increase by 5.25% in proportionate terms
after the Second FB Buyback.
Impact of Second FB Buyback on Voting Rights Levels
Current
1
Second FB Buyback Post Second FB Buyback
No. of
Shares
%
No. of
Shares
No. of
Shares
%
JCR Trust 30,778,017 54.48% 30,778,017 57.35%
CMJR Trust 2,598,318 4.60% 2,598,318 4.84%
E&P
2,747,138 4.86%
2,747,138 5.12%
JCR Associates 36,123,473 63.95% - 36,123,473 67.31%
Non-associated Shareholders 17,546,722 31.06% 17,546,722 32.69%
Franchise Brands 2,820,000 4.99% (2,820,000) - -
Total
56,490,195 100.00% (2,820,000) 53,670,195 100.00%
1 After the Clause 5 Exemption Purchase
Shareholder Voting
The JCR Associates can currently determine the outcome of any ordinary resolutions
(which require the approval of more than 50% of the votes cast by shareholders) and
block any special resolutions (which require the approval of 75% of the votes cast by
shareholders) with their 63.95% shareholding, subject always to applicable voting
restrictions under the Code, the NZAX Listing Rules and the Companies Act 1993.
We note that while a 63.95% interest is technically not sufficient to singlehandedly
pass a special resolution, in reality, it most probably can due to the fact that a number
of shareholders in widely held companies (such as BurgerFuel with over 2,500
shareholders) tend not to vote on resolutions and hence the relative weight of the
63.95% interest increases.
In our view, the 3.36% increase in voting rights for the JCR Associates from 63.95%
to 67.31% under the Second FB Buyback will not enhance its ability to control the
outcome of an ordinary resolution or special resolution to any significant degree.
Burger Fuel Worldwide Limited Page 14 Independent Adviser’s Report
Board of Directors
The Company has 3 directors as set out in section 3.5, one of whom (Mr Roberts) is
associated with the JCR Associates.
We are advised by the Non-associated Directors that the Second FB Buyback will
not have any impact on the composition of the board of directors.
Operations
We are advised by the Non-associated Directors that the Second FB Buyback will
not have any impact on the level of influence of the JCR Associates over the
Company’s operations.
2.7 Impact on Share Price and Liquidity
Set out in section 3.10 is a summary of BurgerFuel’s daily closing share price and
monthly volumes of shares traded from 5 January 2016 to 9 August 2018.
During the period, the Company’s shares have traded between $0.65 and $2.78 at a
VWAP of $1.37. However, trading in the Company’s shares is extremely thin,
reflecting that over 75% of the shares are held by MRHL and Franchise Brands.
In the past year, only 1.5% of the Company’s shares traded on the NZAX between
$0.65 and $1.34 at a VWAP of $0.92.
Impact on Share Price
The Second FB Buyback New Zealand dollar equivalent price of $0.37 per share is
at a discount of between 45% and 60% to the VWAP over the past year (measured
over different periods of between one month and one year).
In theory, the market should react favourably to the Second FB Buyback on the basis
that the shares are being purchased at a significant discount to the prevailing market
price and are then being cancelled.
Based on the one month VWAP of $0.67, the theoretical impact of the Second FB
Buyback on the Company’s share price is a 3% increase of $0.02 to $0.69 (all other
things being equal).
Theoretical Impact of the Second FB Buyback on the Company’s Share Price
Share Price
No. of
Shares
Market
Capitalisation
($000)
Current $0.67
1
56,490,195 37,848
Second FB Buyback ($0.37) (2,820,000) (1,043)
Theoretical share price
$0.69
2
53,670,195 36,805
1 Based on the one month VWAP
2 Post Second FB Buyback market capitalisation ÷ no. of shares
However, the limited liquidity in the Company’s shares means that there is no
certainty that the theoretical increase in the Company’s share price will arise. We
note that there was no uplift in the Company’s share price when the completion of
the Initial FB Buyback was announced on 17 July 2018. In fact, BurgerFuel’s share
price has decreased from $0.68 on 17 July 2018 to $0.67 on 9 August 2018.
Burger Fuel Worldwide Limited Page 15 Independent Adviser’s Report
Impact on Liquidity
The number of shares held by the JCR Associates and the Non-associated
Shareholders will not change under the Second FB Buyback. Therefore, the Second
FB Buyback is unlikely to have a positive or negative effect on the liquidity of
BurgerFuel’s shares in the near term.
2.8 Benefits and Disadvantages to Non-associated Shareholders
Key Benefits
The key benefit of the Second FB Buyback to the Non-associated Shareholders is
that it should, in theory, improve the Company’s share price.
Main Disadvantage
The main disadvantage is that the Second FB Buyback will increase the JCR
Associates’ voting rights from 63.95% to 67.31%, thereby marginally increasing their
ability to control the outcome of shareholder voting.
However, we do not consider the increased level of control to be of any significance.
Furthermore, we note that the Second FB Buyback will result in all shareholders’
proportionate interests in the Company increasing by 5.25%. The Non-associated
Shareholders’ interests in BurgerFuel will increase by the same proportion as the
JCR Associates’ increase.
Unlikely to Change the Likelihood of a Takeover Offer from the JCR Associates
We are not aware of any intention on the JCR Associates’ part to make a takeover
offer. However, if they did have such intent, an increase in the JCR Associates’
voting rights from 63.95% to 67.31% is unlikely to change the likelihood of a takeover
offer from them as the increase in their level of voting rights is not significant from a
control perspective.
Likelihood of Other Takeover Offers Does not Change
We are of the view that the increase in the JCR Associates’ voting rights arising from
the Second FB Buyback is unlikely to reduce the attraction of BurgerFuel as a
takeover target to other parties.
Ability for the JCR Trust to Creep
If the Second FB Buyback is approved, the JCR Trust will still be able to utilise the
Creep Provisions to purchase up to 1.63% of the Company’s shares within 12 months
of the completion of the Initial FB Buyback. Following that 12 month period, (provided
the JCR Trust has not utilised any of its remaining entitlements under the Creep
Provisions), the JCR Trust would be permitted to acquire up to a further 5% of the
Company’s shares under the Creep Provisions.
2.9 Implications of the Buyback Resolution not Being Approved
If the Buyback Resolution is not approved, then the Second FB Buyback will not
proceed. Franchise Brands will retain ownership of its 2,820,000 shares in the
Company. The JCR Trust will still need to undertake the Clause 5 Exemption
Purchase.
Franchise Brands has not informed the Company of its intentions if the Second FB
Buyback is not approved. Franchise Brands may decide to retain its shareholding or
sell down some or all of its shares.
Burger Fuel Worldwide Limited Page 16 Independent Adviser’s Report
Alternatively, the Non-associated Directors could decide at a later date to undertake
the Second FB Buyback without seeking shareholder approval, in which case the
JCR Associates would be required to sell down their shareholdings to a level of
65.58% (which takes into account the maximum shareholding level that the JCR Trust
could hold under the Creep Provisions) within 6 months in accordance with clause 5
of the Buyback Exemptions.
This would require the JCR Associates to sell 928,838 shares, which would represent
1.73% of the total shares on issue post the Second FB Buyback.
The sale of shares by either Franchise Brands or the JCR Associates would be
potentially disadvantageous to Non-associated Shareholders as the sale of such a
large parcel of shares would likely place downward pressure on the Company’s share
price, especially if it was undertaken within a relatively short timeframe.
2.10 Voting For or Against the Buyback Resolution
Voting for or against the Buyback Resolution is a matter for individual shareholders
based on their own views as to value and future market conditions, risk profile and
other factors. Shareholders will need to consider these consequences and consult
their own professional adviser if appropriate.
Burger Fuel Worldwide Limited Page 17 Independent Adviser’s Report
3. Profile of BurgerFuel
3.1 Background
The BurgerFuel business was founded by Mr Mason in 1995.
The Company listed its shares on the NZAX on 27 July 2007 following an IPO that
raised $8 million, including approximately $2.74 million from Mr Roberts and his
associates in order to meet the minimum subscription threshold.
The Company’s key events are set out below.
3.2 Nature of Operations
BurgerFuel owns and franchises Burger Fuel gourmet burger restaurants in
New Zealand, Australia, the Middle East and the USA. It also owns the intellectual
property rights to the Winner Winner brand – a New Zealand based gourmet chicken
concept.
Burger Fuel Worldwide Limited Page 18 Independent Adviser’s Report
The Company currently operates a total of 82 Burger Fuel stores and one Winner
Winner store. Three of the New Zealand Burger Fuel stores in Auckland are owned.
The remaining stores are franchised or operate under a master licence agreement:
55 stores in New Zealand
2 stores in Australia
9 stores in Saudi Arabia
13 stores in the UAE
2 stores in Iraq
one store in the USA.
The Winner Winner store in Hamilton is franchised.
BurgerFuel owns and operates a satellite kitchen operation in Auckland.
The Company also exports all its beef as well as other BurgerFuel proprietary
products to the Middle East. This both maintains quality and consistency and helps
to promote BurgerFuel’s story.
3.3 Corporate Strategy
The Company’s strategy revolves around building scale and establishing the
Company as a respected franchisor / licensor offering quality products, exciting
brands and highly supportive systems.
The greatest growth potential for BurgerFuel is seen to be in New Zealand, where
the Company has intimate knowledge of the market.
The Company is focused on profit and growth as well as development in new areas
beyond the Burger Fuel brand.
New ZealandAustralia
Regional StoresSydney
Newtown
Blacktown
Auckland Stores
Albany
Botany Downs
Customs Street
Ellerslie
Glenfield
Henderson
Manukau
Mission Bay
Mt Ed e n
Mt R o s ki l l
New Lynn
Pakuranga
Parnell
Ponsonby
Pukekohe
Queen Street
Silverdale
Sylvia Park
Takapuna
Westgate
Whangaparaoa
Windsor Park
5 Cross Roads
Bethlehem (Tauranga)
Christchurch (Riccarton)
Christchurch (Ferrymead)
Christchurch (Hereford St)
Christchurch (Papanui)
Christchurch (Spitfire Square)
Christchurch (Sydenham)
Courtenay Place
Cuba Street
Hamilton (Frankton)
Hastings
Hataitai
Invercargill
Johnsonville
Kapiti
Lower Hutt
Mt Maunganui
Napier
New Plymouth
Newtown
Palmerston North
Porirua
Rotorua (Fairy Springs)
Rotorua (Redwood Centre)
Rototuna
Takanini
Taupo
Tauranga
Te Awam utu
The Base, Te Awa
Tim aru
Upper Hutt
UAE
Dubai
Al Ba r s h a
Dubai World Trade Centre
Golden Mile
JPP
Jumeirah Beach Residence
Jumeirah Road (Drive-Thru)
Mall of Emirates
Mirdif City Centre
Motor City
Saudi Arabia
Al Am w a j
Al Doha
Al Hassa
Al Khobar (Fouad Centre)
Al Shatea
Nakhlah
Rabea
Riyadh
University
Baghdad
Mansour
Abu Dhabi
Dalma Mall
Sowwah Square
The Shangri-La
Ya s Ma l l
USA
Indianapolis
Broad Ripple
Iraq
Hamilton (Winner Winner)
Burger Fuel Worldwide Limited Page 19 Independent Adviser’s Report
3.4 Key Issues Affecting BurgerFuel
The main industry and specific business factors and risks that BurgerFuel faces
include:
general economic conditions in the territories that BurgerFuel operates in can
affect the levels of demand for the Company’s products
the vagaries of the retail market
competition from other fast food / fast-casual providers is significant and may
impact on the Company’s market share and profitability
an increased public awareness of the potential negative health consequences
of fast food
an increased focus on the quality of food service in fast food outlets
poor performance by franchisees may damage the Company’s reputation and
profitability
being able to manage growth opportunities and ensuring the Company’s
operating systems and distribution networks keep pace with the growth
demands
fluctuations (and specifically increases) in commodity prices
maintaining relationships with suppliers
protection of the Company’s trademarks and intellectual property
product liability issues arising from non-compliance with food hygiene protocols
dependence on key personnel
the inability to adequately finance the Company’s operations.
3.5 Directors and Executive Management
The directors of BurgerFuel are:
Peter Brook, chair and independent director
Alan Dunn, independent director
Josef Roberts, executive director, Group CEO.
In addition to Mr Roberts, the Company’s executive management team includes:
Mark Piet, Chief Financial Officer / Company Secretary
Tyrone Foley, Chief Operating Officer.
Burger Fuel Worldwide Limited Page 20 Independent Adviser’s Report
3.6 Capital Structure and Shareholders
The Company’s IPO in July 2007 raised $8 million through the issue of 8,000,000
ordinary shares at $1.00 per share.
BurgerFuel currently has 56,490,195 ordinary shares on issue held by 2,558
shareholders.
The names, number of shares and percentage holding of the 10 largest shareholders
as at 31 July 2018.
BurgerFuel’s 10 Largest Shareholders
Shareholder No. of Shares %
MRHL
1
39,809,782 70.47%
E&P
1
2,900,000 5.13%
Franchise Brands 2,820,000 4.99%
New Zealand Central Securities Depository Limited 2,120,478 3.75%
Custodial Services Limited 683,433 1.21%
Cartallen Trustee Limited (Cartallen) 486,373 0.86%
JBWere (NZ) Nominees Limited 369,296 0.65%
Peter Brook 336,596 0.60%
Trumpeter Trustees (2007) Limited (Trumpeter) 324,656 0.57%
Sterling Nominees Limited 120,886 0.21%
Subtotal
49,971,500 88.46%
Others (2,548 shareholders) 6,518,695 11.54%
Total
56,490,195 100.00%
1 Prior to the Clause 5 Exemption Purchase
Source: NZX Company Research
Cartallen is a trustee company that holds the shares on behalf of Mr Mason’s wife.
Trumpeter is wholly owned by interests associated with Mr Dunn.
Collectively, the Company’s 3 directors control 33,884,725 shares (59.98%).
3.7 Financial Performance
A summary of BurgerFuel’s recent financial performance is set out below.
Summary of BurgerFuel Financial Performance
Year to
31 Mar 15
(Audited)
$000
Year to
31 Mar 16
(Audited)
$000
Year to
31 Mar 17
(Audited)
$000
Year to
31 Mar 18
(Audited)
$000
Revenue 18,414 20,130 22,217 24,689
Operating expenses
(17,349) (20,637) (20,520) (24,153)
EBITDA 1,065 (507) 1,697 536
EBIT 556 (1,240) 995 (117)
Net profit / (loss) attributable to shareholders 532 (1,144) 889 (463)
EPS (cents) $0.009 ($0.019) $0.015 ($0.008)
EBITDA: Earnings before interest, taxation, depreciation and amortisation
EBIT: Earnings before interest and taxation
Source: BurgerFuel audited financial statements
Burger Fuel Worldwide Limited Page 21 Independent Adviser’s Report
The Company derives most of its revenue from 2 sources:
sales of product
royalties and various fees charged to franchisees and master licensees.
Total system sales have increased from $83 million in the 2015 financial year to
$97 million in the 2016 financial year, $100 million in the 2017 financial year and
$105 million in the 2018 financial year.
The Company recorded a $1.1 million loss in the 2016 financial year. While revenue
increased by 9%, operating expenses increased by 19%, due mainly to costs incurred
in exploring the USA market as well as higher costs in Australia.
Earnings improved in the 2017 financial year to a $0.9 million profit, due to a 10%
increase in revenue while costs were maintained at 2016 levels.
Earnings deteriorated in the 2018 financial year to a $0.5 million loss, due primarily
to the costs associated with the initial establishment and later exiting of the USA
market. 85% of the Company’s revenue was earned in New Zealand.
3.8 Financial Position
A summary of BurgerFuel’s recent financial position is set out below.
Summary of BurgerFuel Financial Position
As at
31 Mar 15
(Audited)
$000
As at
31 Mar 16
(Audited)
$000
As at
31 Mar 17
(Audited)
$000
As at
31 Mar 18
(Audited)
$000
Current assets 11,767 10,249 10,354 10,544
Non current assets 3,961 4,360 5,797 5,100
Total assets 15,728 14,609 16,151 15,644
Current liabilities (1,835) (1,835) (2,483) (2,404)
Non current liabilities (33) (34) (36) (37)
Total liabilities (1,868) (1,869) (2,519) (2,441)
Shareholders’ equity
13,860 12,740 13,632 13,203
NTA per share $0.22 $0.19 $0.19 $0.18
Source: BurgerFuel audited financial statements
The Company's main current assets are cash and cash equivalents ($6.3 million as
at 31 March 2018) and trade and other receivables ($3.0 million as at 31 March
2018).
Non current assets consist mainly of property, plant and equipment ($2.4 million as
at 31 March 2018) and intangible assets (mainly in the form of goodwill and
trademarks) ($2.5 million as at 31 March 2018).
BurgerFuel’s liabilities consist mainly of trade and other payables ($1.7 million as at
31 March 2018).
The Company has no interest bearing debt.
Burger Fuel Worldwide Limited Page 22 Independent Adviser’s Report
3.9 Cash Flows
A summary of BurgerFuel’s recent cash flows is set out below.
Summary of BurgerFuel Cash Flows
Year to
31 Mar 15
(Audited)
$000
Year to
31 Mar 16
(Audited)
$000
Year to
31 Mar 17
(Audited)
$000
Year to
31 Mar 18
(Audited)
$000
Net cash flow from / (used in) operating activities 1,687 (725) 2,580 831
Net cash (used in) investing activities
(2,617) (1,096) (2,254) (942)
Net increase/(decrease) in cash held (930) (1,821) 326 (111)
Net foreign exchange differences 85 178 9 (1)
Opening cash balance 8,566 7,721 6,078 6,413
Closing cash balance
7,721 6,078 6,413 6,301
Source: BurgerFuel audited financial statements
BurgerFuel’s cash flows from its operating activities have generally trended in line
with EBITDA each year.
Net cash used in investing activities have mainly been in respect of the purchase of
property, plant and equipment and store-owing subsidiaries.
3.10 Share Price History
Set out below is a summary of BurgerFuel’s daily closing share price and monthly
volumes of shares traded from 5 January 2016 to 9 August 2018.
Source: NZX Company Research
During the period, BurgerFuel’s shares have traded between $0.65 and $2.78 at a
VWAP of $1.37.
-
25,000
50,000
75,000
100,000
125,000
150,000
175,000
0.00
0.50
1.00
1.50
2.00
2.50
3.00
5/01/20165/05/20165/09/20165/01/20175/05/20175/09/20175/01/20185/05/2018
Volumes Traded
Share Price ($)
BurgerFuel Share Price
Monthly volume (rhs)Closing price (lhs)
Announcement of the termination of
the collaboration agreement
Announcement of
the Initial FB
Buyback
Burger Fuel Worldwide Limited Page 23 Independent Adviser’s Report
An analysis of the Company’s recent VWAP, traded volumes and liquidity (measured
as traded volumes as a percentage of shares outstanding) is set out below.
BurgerFuel Share Trading to 9 August 2018
Period Low
1
($)
High
1
($)
VWAP
1
($)
Volume
Traded
1
(000)
Liquidity
1 month 0.65 0.69 0.67 23 0.0%
3 months 0.65 0.80 0.70 126 0.2%
6 months 0.65 0.90 0.77 292 0.5%
12 months 0.65 1.34 0.92 838 1.5%
1 To 9 August 2018
Source: NZX Company Research
Trading in the Company’s shares is extremely thin, reflecting that over 75% of the
shares are held by MRHL and Franchise Brands. Only 1.5% of the Company’s
shares traded in the year to 9 August 2018 on 172 days.
Burger Fuel Worldwide Limited Page 24 Independent Adviser’s Report
4. Sources of Information, Reliance on Information, Disclaimer
and Indemnity
4.1 Sources of Information
The statements and opinions expressed in this report are based on the following main
sources of information:
the draft BurgerFuel notice of special meeting
the Initial FB Buyback Agreement
the Second FB Buyback Agreement
the BurgerFuel annual reports for the years ended 31 March, 2015 to 2018
data in respect of BurgerFuel from NZX Company Research and S&P Capital
IQ.
During the course of preparing this report, we have had discussions with and / or
received information from the Non-associated Directors and executive management
of BurgerFuel and BurgerFuel’s legal advisers.
The Non-associated Directors have confirmed that we have been provided for the
purpose of this Independent Adviser’s Report with all information relevant to the
Second FB Buyback that is known to them and that all the information is true and
accurate in all material aspects and is not misleading by reason of omission or
otherwise.
Including this confirmation, we have obtained all the information that we believe is
desirable for the purpose of preparing this Independent Adviser’s Report.
In our opinion, the information to be provided by BurgerFuel to the Non-associated
Shareholders is sufficient to enable the Non-associated Directors and the
Non-associated Shareholders to understand all the relevant factors and to make an
informed decision in respect of the Second FB Buyback.
4.2 Reliance on Information
In preparing this report we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was available from
public sources and all information that was furnished to us by BurgerFuel and its
advisers.
We have evaluated that information through analysis, enquiry and examination for
the purposes of preparing this report but we have not verified the accuracy or
completeness of any such information or conducted an appraisal of any assets. We
have not carried out any form of due diligence or audit on the accounting or other
records of BurgerFuel. We do not warrant that our enquiries would reveal any matter
which an audit, due diligence review or extensive examination might disclose.
Burger Fuel Worldwide Limited Page 25 Independent Adviser’s Report
4.3 Disclaimer
We have prepared this report with care and diligence and the statements in the report
are given in good faith and in the belief, on reasonable grounds, that such statements
are not false or misleading. However, in no way do we guarantee or otherwise
warrant that any forecasts of future profits, cash flows or financial position of
BurgerFuel will be achieved. Forecasts are inherently uncertain. They are
predictions of future events that cannot be assured. They are based upon
assumptions, many of which are beyond the control of BurgerFuel and its directors
and management. Actual results will vary from the forecasts and these variations
may be significantly more or less favourable.
We assume no responsibility arising in any way whatsoever for errors or omissions
(including responsibility to any person for negligence) for the preparation of the report
to the extent that such errors or omissions result from our reasonable reliance on
information provided by others or assumptions disclosed in the report or assumptions
reasonably taken as implicit, provided that this shall not absolve Simmons Corporate
Finance from liability arising from an opinion expressed recklessly or in bad faith or
which cannot be disclaimed by law.
Our evaluation has been arrived at based on economic, exchange rate, market and
other conditions prevailing at the date of this report. Such conditions may change
significantly over relatively short periods of time. We have no obligation or
undertaking to advise any person of any change in circumstances which comes to
our attention after the date of this report or to review, revise or update our report.
We have had no involvement in the preparation of the notice of annual meeting
issued by BurgerFuel and have not verified or approved the contents of the notice of
annual meeting. We do not accept any responsibility for the contents of the notice of
annual meeting except for this report.
4.4 Indemnity
BurgerFuel has agreed that, to the extent permitted by law, it will indemnify Simmons
Corporate Finance and its directors and employees in respect of any liability suffered
or incurred as a result of or in connection with the preparation of the report. This
indemnity does not apply in respect of any negligence, wilful misconduct or breach
of law. BurgerFuel has also agreed to indemnify Simmons Corporate Finance and
its directors and employees for time incurred and any costs in relation to any inquiry
or proceeding initiated by any person. Where Simmons Corporate Finance or its
directors and employees are found liable for or guilty of negligence, wilful misconduct
or breach of law or term of reference, Simmons Corporate Finance shall reimburse
such costs.
Burger Fuel Worldwide Limited Page 26 Independent Adviser’s Report
5. Qualifications and Expertise, Independence, Declarations and
Consents
5.1 Qualifications and Expertise
Simmons Corporate Finance is a New Zealand owned specialist corporate finance
advisory practice. It advises on mergers and acquisitions, prepares independent
expert's reports and provides valuation advice.
The person in the company responsible for issuing this report is Peter Simmons,
B.Com, DipBus (Finance), INFINZ (Cert).
Simmons Corporate Finance and Mr Simmons have significant experience in the
independent investigation of transactions and issuing opinions on the merits and
fairness of the terms and financial conditions of the transactions.
5.2 Independence
Simmons Corporate Finance does not have at the date of this report, and has not
had, any shareholding in or other relationship with BurgerFuel, Franchise Brands or
the JCR Associates or any conflicts of interest that could affect our ability to provide
an unbiased opinion in relation to the transaction.
Simmons Corporate Finance has not had any part in the formulation of the Initial FB
Buyback or the Second FB Buyback or any aspects thereof. Our sole involvement
has been the preparation of this report.
Simmons Corporate Finance will receive a fixed fee for the preparation of this report.
This fee is not contingent on the conclusions of this report or the outcome of the
voting in respect of the Buyback Resolution. We will receive no other benefit from
the preparation of this report.
5.3 Declarations
An advance draft of this report was provided to the Non-associated Directors for their
comments as to factual accuracy of the contents of the report. Changes made to the
report as a result of the circulation of the draft have not changed the methodology or
our conclusions.
Our terms of reference for this engagement did not contain any term which materially
restricted the scope of the report.
5.4 Consents
We consent to the issuing of this report in the form and context in which it is to be
included in the notice of special meeting to be sent to BurgerFuel’s shareholders.
Neither the whole nor any part of this report, nor any reference thereto may be
included in any other document without our prior written consent as to the form and
context in which it appears.
Peter Simmons
Director
Simmons Corporate Finance Limited
10 August 2018
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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