Shares in Burger King shot up by 15% today after the struggling fast food chain became the summer's latest acquisition story amid talk it is being stalked by private equity firms.
The 55-year-old chain has been owned by buyout specialists before: it was spun out of then owner Diageo in 2002 by Texas Pacific, Bain Capital and Goldman Sachs in a $1.5bn deal (£950m at the time). They floated the company four years later and still own just under a third of it. Burger King currently has 12,000 restaurants in more than 75 countries.
The latest stories revolve around a bid involving a low-profile firm called 3G Capital Management – perhaps best known as the place where Chelsea Clinton's husband, Marc Mezvinsky, works. It is run by Alexandre Behring, a Brazilian who spent 10 years at GP Investments, one of Latin America's largest private equity firms.
Burger King declined to comment, while 3G failed to return phone calls.
The fast food chain has been hit hard by the global financial slowdown, with sales under pressure in the US from rising jobless numbers and declining consumer confidence. Last week the company said worldwide sales this year were down 2.3%, compared with an increase of 1.2% last year. Sales in North America were down 3.9%. Bitter rival McDonald's, however, has fared better: its global sales in the second quarter were up 4.8%, with US sales up 3.7%.
David Tarantino of stockbrokers Robert W Baird said: "While we would not consider a transaction a foregone conclusion, we see several factors that make a buyout plausible: Private equity investors have been active in restaurants, with several deals announced since mid-2009; Burger King has struggled amid the challenging economy …; [and] the private equity consortium that led the leveraged buyout of Burger King in 2002 still owns 31% of outstanding shares [so] a sale would allow these investors a logical exit from their positions."
Tarantino has set a price target for the shares of $19. They closed on Tuesday night at $16.45, but added $2.42 to $18.87 by mid afternoon in New York, valuing the company at $2.2bn.
The low valuation of many publicly quoted businesses, as a result of the ongoing volatility in financial markets, has produced a flurry of takeover offers in recent weeks.
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