Brazilians buy Burger King
Burger King (NYSE:BKC) announced that it has agreed to sell itself to an investment firm based out of Brazil in a deal valued at approximately $4 billion, which includes the assumption of debt.
The buyout marks the largest leveraged acquisition of a fast-food chain ever, and the second for Burger King in the last eight years.
The whopper-maker’s possible new owner, 3G Capital, is backed by a number of wealthy Brazilians, like Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira who plan to expand Burger King’s foothold internationally, especially in Latin America and Asia.
Burger King, often abbreviated as BK, is a global chain of hamburger fast food restaurants headquartered in unincorporated Miami-Dade County, Florida, United States.
The company began as a franchise restaurant chain, based in Jacksonville, Florida in 1953, named Insta-Burger King. After the company ran into financial difficulties in 1955, its two Miami-based franchisees,David Edgerton and James McLamore, purchased the company and rechristened it Burger King. Since that time, the company has used several variations of franchising to expand its operations. Burger King Holdings Corporation is the parent company of Burger King; in the United States it operates under the Burger King Brands title while internationally it operates under the Burger King Corporation banner.
3G Capital Management LLC is a global value-oriented investment company that seeks to invest in a concentrated portfolio of high-quality publicly-traded businesses. The firm’s objective is to deliver above-average capital appreciation to its clients over the long-term while maintaining below-average risk profile. To accomplish this objective 3G Capital Management LLC pursues the strategy of investing in equities of well-managed fundamentally solid companies that are trading at a substantial discount to their intrinsic (private market) value.
The deal is the largest leveraged buyout of a fast-food chain ever, according to the market researcher CapitalIQ, and the second for Burger King in the last eight years.
3G Capital decided upon Burger King as a potential investment several months ago and began a series of friendly discussions with the fast-food chain’s management.
3G managing partner Alexandre Behring said that the iconic name of Burger King, its strong franchise network and exciting product offerings were perfectly suited for the Brazilian firm’s business thrust.
However, analysts were quick to note that the deal was forged amidst the continuing sales declines of Burger King in North America where the company draws almost 70 percent of its overall revenues.
Just last week, the company issued a gloomy projection that sales would continue to suffer at the start of the new fiscal year as it cited that instability in the prices of wheat and beef could greatly impact its first half results.
Burger King is expected to receive $24 per share for a total of $3.26 billion from 3G under the deal, registering a 46 percent premium from its share values prior to the takeover talks, though the company’s stocks had spiked to a high of $22.06 in April and even settled to $23.59 following the announcement of the deal.
Both companies said that the deal would be finalized by the fourth quarter of 2010 with 3G first set to start its tender by September 17 and in between, Burger King could still exercise its right to entertain rival offers until October 12.
Burger King was bought in 2002 by TPG Capital, Bain Capital and Goldman Sachs but it went public again in 2006 while its probable new owner, 3G Capital, is mainly investing on consumer-focused firms.
Questions.
- What is a fast-food restaurant? Do you know of any restaurants like this in Brazil?
- What is the economic impact of this buy over? your opinion.
- Do you think the Brazilian company will do a better job at managing Burger King? Why? Why not?
http://www.nytimes.com/2010/09/03/business/global/03burger.html?_r=1&src=busln
http://www.3gcapital.com/index.php
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3G is known by its aggressive approach and has a historic of success in making business turn around. Based in the G3 historic, I do not doubt that they are able to make Burger King more profitable, expand the network and I even would not be surprised if in some years G3 re-sell Burger King for some billions more, making and expressive money in the whole transaction. They are very well informed, they have important connections, they are smart, fast and profit oriented. So, let’s see how fast and far Burger King will go from now on.