Bloomberg Line — Zamp (ZAMP3), owner of the restaurants Burger King and Popeyes in Brazilhas committed to paying at least 120 million reais (US$23 million) to take over the operation of the American coffee chain starbucks in the country, according to a statement released on Thursday (6).
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The planned operation, which is dependent on judicial and regulatory approval, is considered negative for the company’s credit profilewhich has a debt of nearly 1,800 million reais (US$342.3 million) and a leverage level (net debt/Ebitda) considered high, 2.2 times.
A purchase and sale agreement with a binding offer was signed by Zamp with the SouthRock Groupowned by American investor Kenneth Pope, which filed for a reorganization plan in December 2023.
To move forward, the transaction depends on the final signature of Starbucks Corporation (SBUX), the authorization of the Judicial Branch, within the reorganization plan, and the approval of the Administrative Council of Economic Defense of Brazil (Cade). The final price will be set after adjustments based on inventory levels and the number of stores actually acquired.
Zamp shares rose 14.65%reducing part of the accumulated losses of 42% in 2024 until the close of Wednesday (5).
Zamp did not provide any additional information. SouthRock did not immediately respond to a request for comment. Bloomberg Line.
In 2023, they were closed more than 55 Starbucks brand units with negative results in Brazil. The company has also cut 20% of the management team directly linked to the brand, according to the reorganization plan approved in May. The operation currently has 135 own stores in Brazil.
“The acquisition of Starbucks operations in Brazil by Zamp, if it takes place and is financed with debt, will be negative for its credit profile, as it would increase the existing negative pressures on the rating,” the rating agency Fitch assessed in April, when the negotiation between Zamp and SouthRock was made public.
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Zamp did not reveal the assets to be acquired or the form and term of payment. Still, Fitch notes additional risks related to the need for working capital, primarily to replenish the coffee chain, as well as the need to revitalize the stores and brand.
“Fitch sees no room to increase Zamp’s leverage and an operation of this nature would entail additional treasury needs and would be accompanied by relevant execution risks,” the agency notes.
In its first quarter results, Zamp recorded a net loss of 91 million reais (US$17.3 million), a net debt of 822.3 million reais (US$156.4 million) and an operating cash generation of 25 .2 million reais (US$4.8 million). The company closed 11 units, totaling 1,028 restaurants, of which 767 were owned and 261 were franchised under the Burger King and Popeyes brands.
Zamp’s long-term rating – AA – is on a negative outlook from August 2023 due to frustrations over the strengthening of its cash generation and financial deleveraging trajectory, which, individually, already imply pressure on the rating, according to Fitch .
The company has attracted large investors and raised funds in the market to strengthen its cash position. In the first quarter, for example, Zamp concluded the issuance of an Agricultural Credit Certificate (CRA) for 700 million reais (US$133.1 million) in order to extend short-term maturities.
In March, Mubadala Capital, the investment arm of Abu Dhabi’s sovereign wealth fund, acquired a 38.5% stake in Zamp, with plans to increase its retail portfolio in Brazil by focusing on international restaurant franchises. In April, Affinity Partnersowned by investor Jared Kushner, landed a seat on Zamp’s board of directors.
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The situation of SouthRock, according to the administrator of the reorganization plan
Under the agreement with Zamp, SouthRock will have to create a new company to complete the sale of “certain assets and rights” that make up the operations of Starbucks stores in Brazil.
Zamp may match any offer submitted by third parties and will be entitled to be compensated (break up fee) if your proposal is not the winner in the competitive process provided for in the reorganization plan.
In his February monthly report, the latest available, the trustee Laspro Consultants reported that SouthRock’s list of creditors amounted to 1,783 million reais (US$339.1 million) and that the group companies under a reorganization plan, including the Starbucks operation, had net income of 73.8 million reais ( US$14 million).
“The revenue margin was insufficient to cover operating costs, resulting in a net loss of 20.7 million reais (US$3.94 million),” the report revealed.
Founded in 2015, SouthRock Group became the master licensee of the brands starbucks and TGI Fridays in Brazil in 2018. In its reorganization plan application, SouthRock cited that monthly gross revenue earned from Starbucks stores and cafes in Brazil exceeded 50 million reais ($9.5 million).
When evaluating the reorganization plan of the SouthRock Group in February, which provides for the sale of assets, the consulting firm Galeazzi & Associados considered it “viable from an economic and financial point of view”, but spoke of the “normal risks of the market, for reasons “not planned or foreseeable at this time.”
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SouthRock’s creditors include the country’s largest banks, Itaú Unibanco (ITUB4), Bank of Brazil (BBAS3), Bradesco (BBDC4) and Santander (SANB11). Banks also appear Votorantim, Daycoval, Modal, Pine, BS2 and ABC Brazil (ABCB4).
Banco do Brasil has the largest number of loans (134,298 million reais or US$25.54 million), followed by Santander’s subsidiary in Luxembourg (45,404 million reais or US$8.64 million), Bradesco (29,133 million reais or US$5.54 million), Santander Brasil (8.775 million reais, or US$1.67 million) and ABC (5.386 million reais or US$1.02 million). With Itaú figures, the debt amounts to 2,708 million reais (US$515 million).
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