Burger King Goes Public Again

The Wall Street Journal reports that 3G Capital Management, current owner of Burger King, sold 29% stake in the hamburger chain for $1.4 billion to Justice Holdings.  William Ackman of Pershing Square Capital Management will own 10% of Burger King as co-owner of the investment fund, Justice Holdings.  When it lists at the New York Stock Exchange, Burger King will henceforth be Burger King Worldwide Inc.  3G Capital bought the restaurant chain in 2010 and despite efforts to improve its sales, Burger King has remained No. 3 behind McDonald’s and Wendy’s in the US market.  Analysts blame its lagging performance to its scant menu and wrong pricing.  It plans to improve its standing by revamping its menu to include salads, fruit smoothies and chicken snack wraps.  It will also target a broader market as it gears away from men in their 20s, a market hard hit by unemployment.

Burger King Holdings Inc. is to become a public company again through a complex deal with an investment fund co-owned by William Ackman.

Justice Holdings Ltd., a U.K.-listed investment vehicle, will take a 29% stake in the hamburger restaurant chain and pay Burger King’s current owner, 3G Capital Management, $1.4 billion in cash, the parties said Tuesday. In the process, Justice Holdings will cease to list as an independent company.

3G Capital, a New York-based investment firm with Brazilian backers, paid $4 billion in equity and debt to take Burger King private in 2010 and will remain Burger King’s largest shareholder, with a stake of around 71%. Through its interest in Justice, Mr. Ackman’s fund, Pershing Square Capital Management, will own about 10% of Burger King when it relists.

The fast-food chain plans to list on the New York Stock Exchange and will be renamed Burger King Worldwide Inc. Current management will remain unchanged, according to the companies.

When 3G Capital bought Burger King, one of the main goals was to improve its lagging performance. Burger King has struggled to compete against rivals such as McDonald’s Corp. MCD +1.17% and Wendy’s Co., WEN -0.20% with analysts and franchisees blaming the chain’s problems on scant menu development and flawed pricing. Burger King slipped to third place in U.S. sales among burger giants last year, falling behind Wendy’s for the first time, according to an analysis conducted for The Wall Street Journal by Technomic Inc. McDonald’s continues to hold the No. 1 spot.

The company on Monday took its boldest step, announcing the biggest menu revamp in its 58-year history and expanding into salads, fruit smoothies and chicken snack wraps.

The decision to go public again was driven by building momentum at the restaurant chain, with the deal providing Burger King a chance to list itself without going through the time-consuming process of a traditional initial public offering, Burger King Chief Financial Officer Daniel Schwartz said Tuesday. …

Photo by Morton Fox

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