3G Capital to buy out Burger King for $3.26B

CHICAGO - Burger King's new ruler could help expand its empire.

Burger King Holdings Inc. sealed a deal Thursday to sell itself for $3.26 billion to 3G Capital, an investment firm with strong ties to Latin America. The fast-food chain's chairman and chief executive officer, John Chidsey, said the deal will help it expand overseas.

Mr. Chidsey, who will become co-chairman after the tender offer is complete, said the $24-per-share deal brings 3G Capital's experience and contacts abroad.

More than a third of Burger King's locations are outside the United States. That's growing as the company shifts its expansion focus to other countries. In the past year, 90 percent of its new locations were built abroad.

Mr. Chidsey declined to comment on specific strategies and potential efforts to cut costs, including possible layoffs.

Messages left for 3G Capital weren't returned but the company told franchisees and investors in a letter on its Web site that it plans to invest in the brand and highlighted opportunities in Asia and Latin America. Burger King's headquarters will remain in Miami.

Burger King has more than 12,100 locations worldwide and perennially lags its far larger competitor McDonald's Corp. It struggled to keep up during the economy's roller coaster of the past two years.

Its biggest problem: high unemployment among its most important, but notoriously fickle, group of customers - young men between 18 and 34, whom it has targeted with big burgers such as the 930-calorie BK Quad Stacker and edgy ads featuring the creepy King character.

But there are deeper reasons for five consecutive quarters of declines in sales at sites open at least a year.

Burger King's concept of flame-broiled burgers isn't so rare any more, thanks to a boom in gourmet hamburgers from smaller competitors. And its profits suffer from trying to match McDonald's super-low prices, which has angered franchisees.

"McDonald's is just eating their lunch," said Bob Goldin, an analyst at the food consulting firm Technomic Inc. "Burger King's very heavily focused on a core audience of the younger male. And with that group, their attention goes to whoever has a better deal or whatever is hotter."

Burger King became publicly traded in 2006, four years after a consortium of investment firms acquired the company.

The group - TPG Capital, Bain Capital Partners, and Goldman Sachs Funds - still owns 31 percent of Burger King's outstanding shares and has agreed to tender its stock.

Under the terms of Thursday's deal, a 46 percent premium over the company's stock price before rumors of a buyout circulated, 3G Capital Managing Partner Alex Behring will join Mr. Chidsey as co-chairman. The two said the deal has a $4 billion value including debt.

3G Capital is expected to begin to acquire the outstanding shares by Sept. 17.

The company owns controlling or partial stakes in major beer maker Anheuser-Busch InBev; Lojas Americanas, a major Brazilian retailer and travel agency, and America Latina Logistica, the largest railroad and logistics company in Latin America.

Its biggest holding is a 4.5 percent stake of CSX Corp., the United States' third-largest railroad.