Burger King is getting ready to hit the public markets again — and it’s using a convoluted deal structure. The IPO will involve a merger with an investment holding company in London, which will then list shares on the New York Stock Exchange. This process is likely to be quicker than a traditional IPO (which can easily take six months).
When it comes to financial engineering, Burger King is a pro. 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). Four years later, Burger King pulled off an IPO. Then in 2010, it went private again in a transaction worth $3.3 billion. The private equity sponsor was 3G Capital.
With the latest IPO, that investment firm will get $1.4 billion in cash and still keep 71% of the equity in Burger King. So, yes, it looks like a juicy deal for 3G.
But it may not be so good for public shareholders. Keep in mind that Burger King continues to struggle as it must compete with rivals like McDonald’s (NYSE:MCD) and Wendy’s (NASDAQ:WEN). To reinvent the brand, the company has recently added healthy menu items, such as fruit smoothies and snack wraps, and has launched an advertising campaign with Sofia Vergara and Salma Hayek.
Yet in the fourth quarter, Burger King’s revenue fell by 0.7%, and the company has recently dropped to the No. 3 position in the fast-food burger market.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”, “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.