Burger King Stock Is Back — WITHOUT an IPO

by Jeff Reeves | June 20, 2012 9:31 am

Lately, investors should have plenty of examples of how stocks are born via an initial public offering. In the case of Facebook (NASDAQ:FB[1]), we saw in painful detail how a fast-growing tech company can go from Internet darling to IPO flop overnight[2]. Other big offerings of various success in the past few months include organic foods giant Annies Inc. (NYSE:BNNY[3]) and investment powerhouse Carlyle Group (NASDAQ:CG[4]).

But not all companies reach the bright lights of Wall Street via an IPO. In the case of Burger King, which was taken private in 2010[5] for $3.3 billion, it avoided the complicated path that Facebook and Annies followed to the stock market.

Burger King — which will trade under the symbol BKW on the NYSE — is avoiding an IPO altogether. And it starts trading again today.

Burger King is using a convoluted deal structure to pull this off. It is merging with an existing stock that already trades publicly to gain access to Wall Street.

That stock is Justice Holdings, a U.K.-based investment entity that trades on the London Stock Exchange. Burger King’s private ownership group, 3G Capital, received $1.4 billion from Justice for a minority stake in BKW — and Justice in turn will suspend its stock, change its name to “Burger King Worldwide” and then re-list those shares in New York.

3G Capital still has a 71% stake in the company and hopes to see a nice profit on its initial $3.3 billion investment in Burger King once shares start trading publicly.

Sound overly complicated? Well, according to IPO expert Tom Taulli, these kind of financial acrobatics are common practice at the Home of the Whopper.

“When it comes to financial engineering, Burger King is a pro,” Taulli writes in the IPOPlaybook blog[6]. “The company went private in 2002 in a $1.58 billion deal. The private equity sponsors included TPG, Bain Capital and Goldman Sachs (NYSE:GS[7]). Four years later, Burger King pulled off an IPO. Then in 2010, it went private again in a transaction worth $3.3 billion (to 3G Capital).”

Why all these deals? Why, to make the private owners rich, of course! Every time someone can buy Burger King and sell it for a profit, they get a huge payday.

But what does this mean for consumers and investors? Strangely enough, every buyout and reformulation of BK involves an effort to reconnect with customers and make the restaurant more competitive.

Take the latest changes in the past year or two at Burger King:

And that’s just a few of the plans!

Whether consumers will ever connect with the changes is the big question. However, at least the private equity folks have done more than simply cut back on salaries and portion sizes to wring more profits out of Burger King operations.

But if you like what you see (and taste), the good news is you won’t have to wait months for Burger King to go public. Shares are hot and fresh this week.

Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.”[14] Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, Jeff Reeves owned a position in Apple but none of the other stocks named here.

Endnotes:
  1. FB: http://studio-5.financialcontent.com/investplace/quote?Symbol=FB
  2. IPO flop overnight: http://investorplace.com/ipo-playbook/where-does-facebook-go-after-the-faceplant/
  3. BNNY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BNNY
  4. CG: http://studio-5.financialcontent.com/investplace/quote?Symbol=CG
  5. taken private in 2010: http://investorplace.com/2010/09/burger-king-holdings-inc-bkc-buyout-bid-peaked/
  6. IPOPlaybook blog: http://investorplace.com/ipo-playbook/burger-king-plans-to-go-public-again/
  7. GS: http://studio-5.financialcontent.com/investplace/quote?Symbol=GS
  8. massive facelift for Burger King: http://investorplace.com/2010/10/burger-king-to-remodel-franchises/
  9. 1,000 burger joints in China: http://investorplace.com/2012/06/burger-king-plans-to-add-1000-restaurants-in-china/
  10. A new breakfast menu: http://investorplace.com/2010/09/burger-king-breakfast-menu-compete-mcdonalds/
  11. SBUX: http://studio-5.financialcontent.com/investplace/quote?Symbol=SBUX
  12. home delivery of its fast food: http://investorplace.com/2012/01/burger-king-testing-home-delivery/
  13. a bacon sundae: http://investorplace.com/2012/06/4-things-to-know-about-bks-bacon-sundae/
  14. “The Frugal Investor’s Guide to Finding Great Stocks.”: http://www.amazon.com/dp/B007KB9CSI/ref=rdr_kindle_ext_tmb

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