Burger King cooks up IPO deal

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By The Associated Press | Saturday, May 6, 2006 12:26 AM CDT | () comments

MIAMI (AP) — Burger King’s parent company has raised the amount it hopes to raise in its planned initial public offering, but nearly all of the proceeds will be going to pay off debt at the No. 2 hamburger chain.

Burger King Holdings Inc. said it plans to sell 25 million shares in the IPO at between $15 and $17 a share. The high end of that range would raise $425 million, before underwriting discounts and fees.

The sale would represent about 19 percent of the company’s overall shares, and a sale at $17 a share would value the entire company at about $2.25 billion. The biggest burger chain, McDonald’s Corp., has a market value of about $43.2 billion, while No. 3 Wendy’s International Inc. has one of about $7.1 billion, by comparison.

No date has been disclosed for the Burger King IPO.

Its underwriters will have the option to buy up to 3.75 million more shares if demand is high enough, but Burger King would not receive any of those additional proceeds, the company said in a filing with the Securities and Exchange Commission.

The combined proceeds of up to $489 million from a sale of 28.75 million shares would top the company’s estimate of up to $400 million when it first filed for an IPO in February.

The Miami-based company’s owners — private equity firms Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners — bought the chain in 2002 for $1.5 billion. The price was reduced from the initially agreed $2.26 billion because of Burger King’s slumping sales at the time.

Burger King has fought to recover ground lost to rivals McDonald’s and Wendy’s. It has reported eight straight quarters of sales gains at stores open at least 13 months, but the parent company said last week profits fell 18 percent for its first three quarters of the fiscal year, mainly because of a cash payout to certain stockholders that jacked up debt.

Its long history of changing management has also continued: last month, John Chidsey took over after predecessor Greg Brenneman stepped down just 20 months into the job. Chidsey is the 11th CEO since 1989.

Burger King said it would receive net proceeds of about $374 million with an IPO price of $16 per share, deducting underwriting discounts and other expenses.