Burger King may not have it its way, but the QSR finally has new owners. More than two years after London-based Diageo first put the fast food chain on the block, and almost six months after initially striking a deal with a private equity consortium, the sale went through last week, with a price tag of $1.5 billion.
The new owners include equity firms Texas Pacific (of which BK chairman John Dasburg is a member), Bain Capital, and Goldman Sachs Capital Partners. The transaction hit a bump last month when the consortium asked to revise terms of the agreement, enacting a clause that stated BK had to meet certain performance conditions to get the original minimum price of $2.1 billion.
In the end, however, Diageo, which was more intent on unloading the QSR to focus on its liquor line, agreed to drop the price by almost a third to $1.5 billion. “We are pleased that we’ve been able to reach this agreement despite a difficult market and at a time of tough trading conditions for the quick service restaurant sector,” said Diageo CEO Paul Walsh in a statement. “We continued to review our options but concluded that this transaction with this buying group was the most certain route to achieving separation.”
Diageo received $1.2 billion in cash and the consortium will assume all of Burger King’s $86 million debt. “The change in financial terms, from the initial announcement in July, will reduce the company’s debt burden and strengthen its capital structure,” said Dasburg in a statement. “This will better position BKC as a healthy, independent company for the first time in more than 30 years.”
Despite overhauling its menu earlier this year, operating profits at Miami-based Burger King fell 20 percent within the last six months and restaurant sales slumped five percent between September and November. Earlier this month, the chain’s largest franchisee, AmeriKing-which operates 329 restaurants-filed for bankruptcy. Burger King also dumped its BK Online Rewards program (Dec. 3 Xtra) to focus on a price-cutting battle with struggling rival McDonald’s.
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