Investors bite on Burger King IPO
Updated: 2006-05-19 11:00
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launched its whopping 425-million-dollar public share offering.
Shares rose nearly three percent to 17.50 dollars in closing trade as the "BKC" shares began trading on the New York Stock Exchange, following the richest US restaurant IPO ever.
Including its 3.75-million-share overallotment, the IPO will raise 489 million dollars, outweighing the 389 million raised by Domino's Pizza in 2004.
JP Morgan, Citigroup, Goldman Sachs, Morgan Stanley and five other banks took part in the IPO, which comes after the company was bought from Diageo in 2002 by private equity investors.
Burger King, the second-largest US fast-food group, has been touting itself as a turnaround story with the closure of underperforming stores and same-store sales growth for the past two years.
Meanwhile, IPOs for restaurants such as Chipotle -- spun off by McDonald's -- have been hot.
"Despite Burger King's checkered operational history, lower cash-flow-margin profile and significant debt burden, the company appears to be coming to market at a pretty attractive price if you think it can meet management's expectations for top- and bottom-line growth that exceed projections for the industry," Renaissance Capital said in its featured IPO column.
On April 7, Burger King named John Chidsey chief executive as turnaround specialist Greg Brenneman stepped down to return to his private equity firm, TurnWorks Inc.
In the nine months to March 31, Burger King reported net income of 37 million dollars on revenue of 1.52 billion, compared with 45 million dollars in net income on 1.44 billion in revenue in the year-ago period.
The company said it expects to receive net proceeds of approximately 393 million dollars from the IPO. It intends to use the net proceeds for repayment of 350 million dollars of outstanding debt, with the balance used for general business purposes.
Following this offering, Burger King Holdings, Inc. will remain majority-owned by Texas Pacific Group, Bain Capital Partners and the Goldman Sachs Funds.
The chain of more than 1,200 company-owned and 9,882 franchised restaurants in more than 65 countries traces its roots to 1954, when entrepreneurs James McLamore and David Edgerton opened the first Burger King restaurant in Miami, Florida.
In 1967, the founders sold the chain to Pillsbury, which itself got swallowed up in corporate mergers that resulted in the formation of Diageo in 2000.