EG Group to sell all its 218 KFC UK&I franchise restaurants to reduce debt
Blackburn-based EG Group, has agreed to sell all its 218 KFC franchise restaurants in the UK and Ireland, to Yum! Brands’ KFC Division, for an undisclosed sum.
Global forecourts and food service operator EG Group, the largest KFC franchisee in the UK and Ireland, said the deal is the latest step in its delevergaging strategy to put in place a sustainable capital structure.
The sale is expected to complete in the first half of 2024, with proceeds to be used to repay debt.
EG Group continues to operate in the USA, Australia, Germany, France, Italy, the Netherlands, Luxembourg, Belgium and the UK, including its wholly-owned bakery business, Cooplands, as well as franchise businesses with the Starbucks, Subway, Greggs, Sbarro, Chaiiwala and Cinnabon brands.
Brothers Zuber Issa and Mohsin Issa, co-founders and co-CEOs of EG Group, said: “We are proud to have been a strategic partner of KFC in the UK and Ireland, playing an important role in helping the brand expand its footprint.
“Now is the right time to hand the baton to the KFC leadership team to continue to grow the brand in the UK and Ireland.”
They added: “This is the latest transaction in our significant deleveraging this year to put in place a sustainable capital structure for the group.
“We would like to thank all the colleagues who have helped deliver such exceptional brand standards and customer service over recent years, including during the COVID-19 period.
“We continue to make good progress against our key strategic priorities – delivering a world class grocery and merchandise, foodservice and fuel proposition across nine markets globally.”
Late last month EG Group published its third quarter results, which showed a reduction in debt, but also saw both revenues and EBITDA fall.
On October 31, 2023, EG completed the sale of the majority of its UK & Ireland business to Asda generating a cash consideration of $2.5bn. These proceeds have been used – together with the net proceeds from the recent sale and lease back transaction in the US and the $43m net proceeds from the non-core US asset disposal – to repay almost $4bn of the group’s debt and significantly reduce net leverage, in line with the previously announced financial policy and deleveraging strategy.
The completion of the UK disposal to Asda enabled the group to meet the conditions required to complete the Amend and Extend of $1,714m of USD Term Loan, $1,402m-equivalent of EUR Term Loan, and $53m-equivalent of GBP Term Loan from February 2025 to February 2028, including new money of approximately $378m.
On November 27, 2023, EG Group completed the issue of $1.6bn equivalent of Senior Secured Notes, which mature in November 2028. The group has also secured an additional $500m of privately placed notes and a $200m equivalent bridging facility. These refinancing transactions will be used to repay the group’s existing facilities, addressing its remaining near-term 2025 maturities in full, and leaving only $59m remaining in 2026.
Law firm Freeths advised EG Group on the sale, led by Real Estate Partner Atiyya Khaliq.