LOS ANGELES--Burger King Holdings Inc agreed to sell itself to investment firm 3G Capital for $3.26 billion, giving the No. 2 U.S. fast-food chain breathing room to fix its business and close the gap with leader McDonald's Corp.
At $24 per share, the offer represents a 46 percent premium to Burger King's price before news of the negotiations emerged on Wednesday. "It was a call out of the blue," Burger King Chairman and Chief Executive John Chidsey told Reuters in an interview when asked about how the talks started. He declined to give additional details.
Chidsey will keep his roles during a transition period and then become co-chairman with 3G Managing Director Alex Behring.
The sale, worth about $4 billion including debt, is expected to close in the last three months of 2010. Burger King has until Oct. 12 to solicit a richer offer from other buyers.
"It looks like a good price for Burger King shareholders. I don't anticipate that someone is going to come in higher," said Telsey Advisory Group analyst Tom Forte.
"The valuation is based on good fundamentals, which Burger King doesn't have and probably won't have for another year," said Stifel Nicolaus restaurant analyst Steve West. On Wednesday, he had issued a research note saying that a $23-per-share price would satisfy shareholders.
Analysts said the deal's valuation--at almost nine times cash flow over the last year--is higher than previous restaurant deals and could pave the way for more.
TPG Capital LP, Goldman Sachs Group Inc's Goldman Sachs Capital Partners and Bain Capital Investors collectively own about 31 percent of Burger King and will tender their shares into 3G's offer, due to begin by Sept. 17. Burger King's private equity investors took the company public just four years ago at an initial share price of $17.
At the market close on Tuesday, shares in Burger King were down more than 31 percent since the end of 2008. McDonald's shares were up nearly 18 percent. Burger King's stock jumped 25 percent to close at $23.59, on Thursday, adding to Wednesday's 15 percent gain. Shares in bigger rival McDonald's rose 0.6 percent and Wendy's/Arby's Group Inc added 6.8 percent.
3G, a little-known investment firm, was last in the spotlight in 2008, when it waged a proxy battle alongside The Children's Investment Fund against U.S. railroad CSX Corp. That led to Behring joining the railroad's board.
3G's backers include Brazil's Jorge Paulo Lemann, who sits on the board at Anheuser-Busch InBev NV. Forbes magazine estimates his fortune at $11 billion.