Confirming market speculations, Burger King Holdings Inc. (BKC), which became public in 2006, Thursday announced an acquisition deal with New York-based private equity firm 3G Capital. Under the deal, affiliates of 3G Capital will acquire the burger chain's shares for $24 per share or $4 billion, including the assumption of its debt.
The transaction is expected to close in the fourth quarter of this calendar year. Burger King's shares are currently trading up over 23% on the NYSE.
The offer price of $24 per share represents a 46% premium to the company's unaffected share price before recent market rumors.
3G is expected to commence a tender offer for all outstanding shares of Burger King on or before September 17. The transaction is conditioned upon, among other things, the satisfaction of the minimum tender condition of about 79.1% of Burger King's common shares.
Further, the company said that 3G Capital has received debt commitment letters from JPMorgan Chase Bank, N.A. and Barclays Capital to provide the debt financing necessary to close the transaction. Burger King may solicit superior proposals from third parties for a period of 40 calendar days continuing through October 12.
As part of the transaction, Burger King's Chairman and Chief Executive Officer John Chidsey will remain in his current capacity through the transition period. Later, he will assume a newly created position of Co-Chairman of the Board. Upon the deal closure, Alex Behring, Managing Partner of 3G Capital, will be named Co-Chairman of the Board of the company, along with Chidsey.
Commenting on the deal, Chidsey stated, "We look forward to partnering with 3G Capital, whose proven track record as an investor, together with its financial and consumer brands experience, will serve to further strengthen the Company, our restaurants and franchisees worldwide."
Burger King has a market capitalization of about $2.26 billion and operates more than 12,000 restaurants in over 75 countries. After going public about four years ago, the fast food chain had a tough time as the recession and unemployment reduced consumer spending, thereby impacting the company.
Burger King is not new to being held by private equity firms. In 2002, a group led by TPG Capital LLC, Bain Capital LLC and Goldman Sachs Capital Partners acquired the company from Diageo PLC for about $1.5 billion. They continue to own about 31% stake in the company, along with significant representation on its board, and have agreed to tender their shares into the 3G Capital tender offer.
Last month, Burger King said that its fourth-quarter net income declined to $49.0 million or $0.36 per share from $58.9 million or $0.43 per share in the same quarter last year. Worldwide revenues slipped 1% to $623.0 million, impacted by lower comparable sales and currency translation.
At that time, Chidsey said, "In fiscal year 2010, we faced sustained levels of high unemployment and a fragile global economy that combined made this one of the toughest operating environments in recent history...As we enter fiscal 2011, we anticipate that the challenging consumer environment will continue due to high unemployment and underemployment levels and weak consumer confidence."
Burger King is currently trading at $23.40, up $4.54 or 24.07%, on a volume of over 53.8 million shares. For the past 52-week period, the company's shares had been trading in a rage of $16.31 - $23.44.
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