|Burger King fared worse than its bigger rival McDonald’s in the wake of the financial crisis [AFP]|
Burger King has announced that it is being sold to the private equity firm 3G Capital in a deal valued at $3.26 billion.
The US fast food chain, with its 12,100 locations around the world, has struggled to keep up with its rivals during the economic turndown over the past two years.
“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,” John Chidsey, Burger King chairman and chief executive, said in a statement on Wednesday.
The deal, worth $24 a share, comes after a day of speculation that sent shares up more than 15 per cent on Wednesday and opened on Thursday up 23 per cent at $23.25.
The offer is a nearly 46 per cent premium over the company’s stock price before rumors of a buyout began circulating for several days.
The deal was unanimously approved by Burger King’s board of directors and is expected to be wrapped up by the end of 2010.
Faring worse than its bigger rival McDonald’s in the wake of the financial crisis, Burger King last week reported a 2.3 per cent drop in global sales in its 2010 fiscal year, compared to a 1.2 per cent increase during the same period last year.
The Miami-based company struggled with a loss in its core customers, young men between 18 and 34, who were hit by unemployment.
Burger King’s once-unique concept of flame-broiled burgers also found itself competing with smaller competitors such as Five Guys, The Counter and In-N-Out Burger while trying to keep up with the McDonald’s super-low prices.
“McDonald’s is just eating their lunch,” Bob Goldin, an analyst at the food consulting firm Technomic Inc, said
“Burger King is very heavily focused on a core audience of the younger male. And with that group, their attention goes to wherever has a better deal or whatever is hotter.”
Burger King, founded in 1954, became publicly traded in 2006, four years after being bought by a group of private equity firms.
The group – TPG Capital, Bain Capital and Goldman Sachs Funds – still own 31 per cent of Burger King shares.
Under the terms of the deal with 3G, Burger King’s Chidsey will become co-chairman of the board. Alex Behring, 3G Managing Partner, will be the other co-chairman.
3G Capital’s biggest holding is its 4.5 per cent stake of CSX Corp., the US’s third-largest railway company.
The company has a minor stake of less than one per cent of outstanding shares of Burger King rival Wendy’s.