Burger King Bought By 3G Capital

Burger King is a restaurant chain that owns the world second in quick-service industry. Internationally, Burger King has more than 11,700 restaurants in the United States and other 74 countries, almost 90% of which are franchise operated.

The history of the company started back in 1954, when James W. McLamore and David Edgerton opened their first restaurant in Miami, Florida. The restaurant was named “Insta Burger King” .

The owner then began globalizing their company. In 1971 Burger King has expanded into Australia and subsidiaries there took the name of “Hungry Jack’s”. They opened a restaurant in Madrid, Spain, in 1975, which was their first restaurant in Europe. One year later, they opened another Burger King place in West Berlin, and in 1980 they opened three branches in Austria, which unfortunately were soon closed. In 2005, Burger King opened their first restaurant in China.

The company has since undergone various changes. Worldwide, there are currently 11,220 Burger King Restaurants in 61 countries with over 360,000 employees. Burger King was sold to Pillsbury in 1967. In 1997, Pillsbury and Guinness merged into Diageo PLC. Diageo announced since June 2000 that Burger King Corporation that will bring its business portfolio down and sold it on December 13, 2002 to an American consortium composed of Texas Pacific Group, a group of companies including Del Monte, Ducati, Continental Airlines, America West;  Bain Capital and Goldman Sachs Capital Partners.

Symbol to Burger King the so called Whopper. But Burger King offers among other kinds of vegetarian burgers and hamburgers, their renowned veggie burger. Other sandwiches are cheeseburgers, Big King, Fish King, and Crispy Chicken.

What is interesting to Burger King, is that some burgers differ from country to country, despite the disallowed corporate identity – for example in Germany you can find Crispy Chicken in red, while in Austria it is missing, but instead in Austria there is a slice of curd (which may be added in Germany). Piding restaurants (Germany) and Wals-Himmelreich (Austria) are just 4 km away from each other, however in this case different burgers still exist.

Now, Burger King is up for sale again, due to loses registered in the last fiscal year, while its rival, McDonald’s managed to increase its sales, during this same period.

Burger King is selling the company and is in the talks with potential buyers, according to sources close to the situation returns. One of the companies concerned about purchasing is a British private equity firm 3i Group PLC. Burger King sales fell last year, while McDonald’s main competitor, has overcome the recession. The same sources say it is uncertain whether the negotiations will end with the sale of Burger King. The fast food chain has faced financial problems last year due in part to the crisis and the fact that the number of unemployed has reached record levels worldwide. Burger King has reported a sales decrease of 2.3% on average last year, compared with the previous fiscal year. Surprisingly, the strongest of the sale’s decline was registered in the U.S. and Canada, as reported 3.9% decrease compared with a sales increase of 0.4% in the previous fiscal year. Analysts have forecast declining as Burger King, because of fears of cost and selling fast food chain. “In the last fiscal year we experienced an extremely high level of unemployment and a fragile global economy. These two, combined, led to the most difficult financial environment possible for a company in recent history, “said Burger King President John Chidsey. Group’s global revenue rose last quarter to 623 million dollars, which means a decrease by 1% compared with same period last year.

For the last fiscal year, the company reported total revenues of $ 2.5 billion, and they decreased with 1% versus the prior year. Burger King, in August, estimated the weak demand in the new fiscal year was because of economic problems, considering the uncertain impact of the cost of raw materials such as beef, on group performance.

On the other hand, the number one rival, McDonald’s, found much better marketing strategies to overcome the crisis. McDonald’s argued in July that its sales rose 4.8% globally in the second quarter of 2010 compared to the same period last year.

Also, McDonald’s sales rose 3.7% in the U.S. in the second quarter, while Burger King sales fell. Burger King has a market capitalization of $ 2.3 billion and approximately 12,000 restaurants in 75 countries. The price per share was $ 16.45 last weekend, down 1.91% at NYSE. Highest price per share was recorded in April this year, and the amount was of $ 22.06/ share.

The second largest fast food chain has a shareholder that private-equity company. TPG Capital LLC, Bain Capital and Goldman Sachs and now hold 32% stake in Burger King after the company bought the British company Diageo beverages in 2002 for $ 1.5 billion dollars.

The group that bought Burger King in 2002 has a significant representation on the board of the company. 3i’s company portfolio consits of the luxury lingerie retailer Agent provocateur Ltd, the European producer of juice Refresco and the restaurant chain Little Sheep based in China. 3TS Capital Partners is one of the leading private-equity companies in Central and Eastern Europe and operates in Budapest, Bucharest, Prague, Vienna and Warsaw. Fund investors include 3i company outside the UK, and companies Cisco, Sitra, the Reconstruction and Development Bank and KfW.

After a few days of speculation, Burger King announced yesterday that the company had been sold to investment fund operations 3G Capital in a transaction valued at 3.26 billion dollars, according to CNBC.

According to Bloomberg, the settlement amounts to four billion dollars, including debt. Company’s shares rose yesterday morning with $ 4.4, and 23% to $ 23.26 / title, the highest level of the last 18 months. This title Wednesday after Burger King rose by almost 15% amid rumors of sale.

Burger King has been publicly listed in 2006; four years after a consortium of private equity firms acquired the company. The group formed by TPG Capital, Bain Capital Partners and Goldman Sachs Funds still holds 31% stake and agreed that their participation is taken into account in this transaction.

The fast-food giant was sold for the amount of 3, 26 billion dollars to 3G Capital. According to the deal, the buyer will also have to deal with Burger King’s debt, which total an amount of 0.8 billion. Under the terms of the transaction with 3G Capital chairman and chief executive of Burger King, John Chidsey (pictured below), will become co-chairman of the board. Alex Behring, managing partner of 3G Capital, will be another co-chairman of the Council.