Shop Talk

Retailers, consumers and prices

Check Out Line: Burger King goes for a pricey $3.26 billion

September 2, 2010

BURGERKINGCheck out Burger King agreeing to be bought for $3.26 billion.

Burger King is letting itself be bought out by the relatively unknown New York-based private equity firm, 3G Capital, for $3.26 billion, or $24 per share, net of debt.

That is a Whopper (sorry, we couldn’t resist) of a premium – 46 percent – over Burger King’s stock price earlier this week, before all this buyout chatter started.

The price did indeed strike some analysts as rich, considering how poorly Burger King has done compared to “Golden Archrival” McDonald’s in recent years.

Stifel Nicolaus’ Steve West said on Wednesday $23 would be enough for shareholders and Burger King’s current private equity owners, TPG Capital, Goldman Sachs Capital Partners and Bain Capital Investors. And Deutsche Bank’s Jason West said a price as low as $19 or $20 could make sense.

Apparently 3G sees a lot of potential in Burger King. The chain — whose diners are disproportionately young and male, i.e. most vulnerable to unemployment — has fallen far behind McDonald’s. Analysts agree going private will give Burger King time and room to do what it needs to narrow the gap with McDonald’s: fix up its old restaurants and upgrade its technology.

The deal is set to close by the end of 2010, though in theory Burger King could solicit higher bids until Oct. 12

Also in the basket:

-  Discounts, heat fuel August US retail sales beat
- Pier 1 sees strong Q2 EPS on margins, more traffic
Dolce & Gabbana to part ways with Selfridges

(Reuters photo)

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