August 21, 2014

Fast Food restaurant

On Burger King's menu: Company shares

Burger King NYSE
Burger King’s mascot makes his rounds at the New York Stock Exchange during the company’s previous IPO in 2006. 3G Capital took the company private in 2010. The recent announcement to make the chain a public company again took analysts by surprise. [Photo: Richard Drew/AP Photo]

The Home of the Whopper is going public again. Owner 3G Capital, which bought Burger King and took it private in 2010, sold a 29% interest in the company to publicly traded shell company Justice Holdings and Justice’s founders. When the $1.4 billion purchase closes, BK will begin trading on the New York Stock Exchange.

The deal surprised analysts. 3G Capital had planned to hold onto the company for a few more years before doing an initial public offering. But the price lets 3G recoup its entire initial cash investment in the BK purchase, while avoiding the hassles of an IPO.

The question is whether Wall Street will have any interest in the stock of a company that has changed ownership four times in the past decade and which recently lost its position as the world’s No. 2 burger chain to Wendy’s. Analysts expect a tough sell. Same-stores sales ended 2011 down half a percent overall and down 3.4% in the U.S. and Canada. Most analysts say the specter of decreasing sales outweighs the fact that, helped by strong growth in markets outside North America, the company posted fourth-quarter profit of $29.4 million, compared to a $93.9 million loss in 2010.

Burger King hopes to strengthen its financials by getting out of the business of running restaurants, striking a deal to sell 278 company-owned stores to its largest U.S. franchisee, Carrols Restaurant Group. Analysts have noted that cash flow is more stable for franchisors than for operating companies, which may help the burger chain’s stock. Its recent menu revamp, with 10 new items in the U.S., and a celebrity-studded ad campaign, have impressed analysts
far less.

Tags: Dining & Travel, Miami-Dade

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