Burger King: PE firms linked with Whopper buyout

Burger King is reportedly in talks with private equity groups, including UK-based 3i, over a possible sale...

by MT Staff
Last Updated: 19 Aug 2013

The take-out chain certainly looks like it needs help, having been badly flame-grilled in the financial crisis. Last week it reported that global sales had dropped 2.3% for its 2010 fiscal year; meanwhile revenue at McDonald's, its biggest rival, gained 3.8%. BK blames its poor performance in the US on rising jobless numbers and declining consumer confidence. What's the world coming to when Americans startlosing faith in their Whoppers?

To MT, the idea of getting your hands greasy on America's second-string burger chain is almost as baffling as the thought of popping in there for a feed. While the Burger King brand may retain some appearances of health - it has a market cap of around $2.26bn - its story is looking as sorry as some of its wayward clientele at 2am.

Indeed, since riding the fast-food boom of the '80s, the company has been well chewed and spat out by a raft of previous owners, including Diageo and a consortium of TPG, Bain and Goldman Sachs, who bought it from the drinks giant in 2002 for $1.5bn and floated it four years later.

These days it divides opinion, to put it kindly. In a recent MT blog, John Vincent, an entrepreneur with inside knowledge of the company, described it as a 'zombie business', lacking care for its customers or people, and 'powerless to influence its franchisees'.

The franchisee element is a potential sticking-point for anyone who now fancies having the chain their way: 90% of Burger King's stores are run as independent entities, which could easily get messy. Perhaps this is why the private-equity talks have (according to the Wall Street Journal) been going on for weeks, without anything yet being slapped between two bits of bap and called a deal.

Yet 3i is a company with a proven appetite for this kind of thing. The UK group has had previous turnaround success with laggards like the Early Learning Centre and Millets (although its knowledge of fast food appears to extend solely to Mongolian hot pot). And Burger King is certainly a challenge to relish.

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