Burger King IPO

Number-two fast-food chain Burger King filed documents for an initial public offering. Its stock-market debut is likely within six months. Shooting for maximum proceeds of $400 million, the IPO - which touts the fast-food chain's turnaround tale - would top the $391 million raised by Domino's Pizza in 2004. Burger King, which owns or franchises 11,141 restaurants in 67 countries, holds a 12% share of the fast-food-restaurant category, which is expected to grow by 4.2% over the next five years. Burger King's share is less than half of #1 McDonald's and just microscopically ahead of #3 Wendy's, which has been making steady progress to overtake Burger King in the last few years.

Founded in 1954, Burger King has amazingly enough never been a public company. It was sold by its founders to Pillsbury in 1967. Pillsbury was then acquired by Grand Met PLC in 1988, which in turn merged with Guiness in 1991 to form Diageo. "As a result, Burger King Corporation became a small, non-core subsidiary of a large conglomerate, making it difficult for the brand to prosper," the company said in an IPO document.

From 1989 to 2002, the company ran through eight CEOs before being acquired by private-equity firms Texas Pacific and Bain Capital Partners for about $1.5 billion. Since then, the company says, it's been "focused on turning a great brand into a great business." It boasts of its seven consecutive quarters of same-store-sales growth and a rise of 11% in average per-restaurant sales over the past two fiscal years. In the six months ended December 31, Burger King reported net income of $49 million on revenue of $1.02 billion(*).

In its third fiscal quarter, now underway, Burger King said it'll record an expense of $367 million for a cash dividend paid to shareholders, prominently including Texas Pacific and Bain. The company also agreed to pay a one-time $30 million fee to terminate its management agreement with the private-equity firms upon completion of the IPO. Meanwhile, the strong stock-market debut of Chipotle - a spinoff of Burger King archrival McDonald's - and the hefty $2.43 billion price fetched by the private sale of Dunkin' Donuts provide evidence of strong investor interest in fast-food-chain operators.

Source: CBS MarketWatch, Chicago Tribune

(*) Note: I have seen many websites (including WikiPedia) that advertise Burger King's revenue as $11 billion a year. That figure is not correct. That is the total sales at Burger King restaurants whether company owned or franchised, not the revenues of Burger King Corporation.