The world’s second-largest fast food chain, Burger King Holdings Inc. (NYSE: BKC) is apparently beating the private equity bushes for a buyout firm. The reports have sent Burger King shares up more than 13% in early trading.
Unlike competitors McDonald’s Corp. (NYSE: MCD) and Yum Brands Inc. (NYSE:YUM), Burger King and Wendy’s/Arby’s Group, Inc. (NYSE: WEN
) have seen share prices fall about 13% and 16%, respectively, since the beginning of 2010. Burger King’s global sales are down -2.3% for the 2010 fiscal year and North American sales are down even more.
According to The Wall Street Journal, Burger King is talking with a British private equity firm, 3i Group plc, which holds stakes in several European consumer companies, but reports no US investments at this time.
By letting the news out, Burger King might be fishing around for a better offer than 3i Group may have put on the table. The WSJ cites “people familiar with the matter” as its source for the story, and the likeliest suspect is someone at Burger King, which stands to gain the most from a bidding war.
The same sort of thing happened earlier this year when Thomas H. Lee Partners announced that it was buying CKE Restaurants, then trading on the NYSE as ‘CKR’. CKE owned Hardee’s and Carl’s Jr. restaurants, and was underperforming badly. Lee offered more than $600 million and assumption of more than $300 million in debt. Then Apollo Management stepped in, and boosted the offer to closer to $1 billion.
That’s what Burger King shareholders would like, especially TPG Capital, Goldman Sachs, and Bain Capital, which together own almost 32% of Burger King. The three firms took Burger King private in 2002 for about $2.26 billion. At the company’s IPO in 2006, Burger King raised about $425 million, the largest ever IPO for a US-based restaurant. Essentially all the IPO receipts went to the private-equity firms.
At the moment’s current share price of $18.24, Burger King’s market cap is $2.48 billion, not a lot more than it was worth in eight years ago. It’s difficult to see a buyer paying a lot more than that for the company, though. Burger King’s track record and outlook should make any buyer think twice.
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