Orgad Closes Deal With Burger King Int'l

Asset sale to rival Burger Ranch awaits nod from trustbuster Dror Strum

Orgad Holdings signed a franchise agreement yesterday with Burger King International. The draft was submitted to the District Court in Tel Aviv, which has given the chain in Israel protection against creditors.

Negotiations between Burger King and Orgad took longer than Judge Varda Alshech had authorized.

A week ago Orgad asked the court for another week's extension. Talks took so long because Burger King International has conducted thorough checks, to make sure that Orgad would not end up like its now-bankrupt predecessor, Rikmor.

Parties now await the decision of Antitrust Commissioner Dror Strum whether local fast food chain Burger Ranch will be allowed to acquire Rikmor's assets, which include mainly long-term restaurant leases.

Burger Ranch has submitted the highest bid, and if Strum has no objections, it will be permitted to buy Rikmor's assets as the conclusion to the former franchisee's bankruptcy proceedings.

This will probably put an end to the Burger King brand in Israel, unless the international corporation finds a franchisee willing to start from scratch.

Strum is to make his decision by the end of the month, but he has already stated publicly in the past that it would be better for market competition if Burger King's local operations were not sold to Burger Ranch.

Burger Ranch's bid was NIS 30 million in cash; Orgad's was NIS 20.5 million in cash, and the balance in royalties. Orgad's total bid may add up to more than NIS 30 million, but not in cash up front.

The owners of Orgad Holdings - Eli and Yuval Orgad - said after they signed the agreement with Burger King International that they are very pleased, but stressed that the group would only comment after the entire deal is approved.

It is considered unlikely Orgad will attempt to launch Burger King operations from scratch if Strum's ruling doesn't take the rights to Burger King's current locations away from rival Burger Ranch.

Burger Ranch and McDonald's have already depleted Burger King's local assets by signing agreements with landlords of Burger King restaurants to get these leases once Burger King's lease is up.

In fact, most lease agreements include a provision that if the chain changes hands, the landlord can cancel the lease agreement.

Therefore, even if Orgad wins the bid for Rikamor's assets, it has no guarantees that it will get to keep them - although in all likelihood landlords will not cancel the lease agreements in tough times for the real estate sector.