Burger King Looking for a Buyout?

Posted Sep 1st 2010 11:20AM by Tom Taulli
Filed under: Private Equity, Burger King Hldgs (BKC)

Back in 2002, Burger King (BKC) went private in a $1.5 billion deal (at the time, the food chain was owned by Diageo PLC). Then in 2006, the company came back to the public markets, providing a nice return for the private equity sponsors, which included TPG Capital, Goldman Sachs Capital Partners and Bain Capital.

OK, so how about going private again? Actually, this is the latest rumor making the rounds. Although, it sounds like the negotiations are in the early stages.

And a deal would make sense. In fact, there have been several going-private transactions in the fast-food space, such as with Carl Karcher Enterprises.

All in all, it is getting tougher for chains to compete against the biggies like McDonald's (MCD) or niche players like Chipotle (CMG). What's more, the slow economy is still a drag on performance. In the case of Burger King -- which gets much of its sales in North America -- it saw a 1% drop in total sales for fiscal year 2010.

As of now, it looks like the interested buyer is 3i Group PLC. But there should be other suitors that come to the table. It also helps that Burger King still has good cash flows, which would support a buyout.

But of course, a deal can easily fall apart. So for investors, there is certainly plenty of risk in playing the stock of Burger King right now.

Tom Taulli is also the author of several books, including the Complete M&A Handbook as well as the upcoming book, All About Short Selling.

Tags: 3i Group, Acquisitions, BKC, Burger King, Burger King buyout, Carl Karcher Enterprises, Chipotle, CMG, fast-food buyouts, featured, inthenews, MCD, private equity