Kiwisaver provider Milford Asset Management played a key role in sealing BurgerFuel's partnership deal with the founders of the Subway sandwich chain.
Franchise Brands - an investment firm established by Subway founders Fred DeLuca and Peter Buck - yesterday received approval from BurgerFuel shareholders to purchase a 10 per cent stake in the Auckland-based company that operates 55 stores in New Zealand, the Middle East and Australia.
BurgerFuel hopes to utilise the partnership to open 1000 new stores over the next eight years as expands into the United States, as well as other potential new markets like China, India, Britain and South America.
The partnership also provides Franchise Brands with the option to boost its stake in the Kiwi gourmet burger operator to 50 per cent over the next eight years.
The deal requires BurgerFuel's majority shareholders, chief executive Josef Roberts and founder Chris Mason, to sell a large amount of stock -both now and in the future if Franchise Brands increases its shareholding - at below the market price.
The US company will purchase its initial 10 per cent shareholding at $1.35 per share, the stock price when talks towards the deal began last April. That's well below today's share price of $2.65.
BurgerFuel shares more than doubled to $3.10 following the announcement of the Franchise Brands partnership last month.
In order to help pave the way for the partnership to go ahead, Milford agreed to sell 600,000 of its BurgerFuel shares, also at $1.35 a piece, to Mason and Roberts.
Milford executive director Brian Gaynor said the fund manager had agreed to the sell-back in order to make the terms of the Franchise Brands partnership "more palatable" for the majority shareholders.
"We reckon that by helping the deal to be executed, we're going to end up substantially better off because hopefully they will be able to execute on the delivery of BurgerFuel stores into the United States and therefore the company will perform quite well," Gaynor said. "If this deal hadn't come through the share price would only be around $1.30."
Milford will retain around 1.9 million BurgerFuel shares, giving it with a shareholding of over 3 per cent.
The investment leaves BurgerFuel with cash reserves of $9 million to $10 million and no debt as it prepares for its next phase of growth.