Hamburger chain Burger King said on Tuesday it plans go public through a deal with a London-listed investment firm, less than two years after it agreed to be taken private by private equity group 3G Capital Management LLC.
The quick sale highlights a profit improvement at Burger King' Worldwide Holdings Inc, which operates more than 12,000 mainly franchise fast-food outlets around the world.
Its new investor Justice Holdings JUSH.L, said it expects the fast food chain's core profits in 2012 to be almost double those in 2010, as it revamps its menu to better compete with McDonald's Corp (MCD.N) and Wendy's Co. (WEN.O).
3G Capital will retain a 71 percent stake in the company, while Justice Holdings, a shell company that went public in February 2011 with the aim of clinching an M&A deal, will merge with Burger King and pay about $1.4 billion in cash for a 29 percent stake in the new company.
Burger King chief financial officer Daniel Schwartz said the deal with Justice valued Burger King at an enterprise value of $8 billion, double its valuation in October 2010 when it was acquired by 3G Capital. He cautioned there would be no quick flip.
"3G still believes it is in the very early innings of what is going to be a very long-term investment in Burger King," Schwartz said in an interview.
"It's the right time for Burger King to be public in the U.S. again. Our new investor base will help us maximize the brand's future potential going forward," he said.
Justice co-founder and hedge fund veteran William Ackman said he raised the Burger King acquisition with his Justice partners, German-American billionaire investor Nicolas Berggruen and his business partner Martin Franklin, founder of Jarden Corp JAH.N.
"They liked what I saw, a 58-year-old global brand, and a simple, predictable, free cash flow growth franchise in the process of transformation into a pure brand royalty business. The results to date have been remarkable," Ackman said in a statement.
3G Capital purchased Burger King in September 2010 in a $3.26 billion deal. The company, known for its Whopper hamburgers, is revamping its menu with items like salads and smoothies as it fights to win over diners and compete with McDonald's.
About 90 percent of its restaurants are owned and operated by independent franchisees. Hamburger chain Wendy's knocked Burger King from its spot as the second-largest U.S. hamburger chain in 2011.
The combined revenues of Wendy's and Burger King came to just under $5 billion last year, while total revenue at McDonald's rose 12 percent to $27 billon, according to earnings statements from the companies.
The new Burger King company is expected to list on the New York stock exchange in the next two to three months while Justice Holdings will stop trading in London straight away.
Ackman bought almost a third of the shares sold by Justice during its fundraising last year, through his Pershing Square funds. Pershing Square funds will own approximately 10 percent of the combined company's outstanding shares as a result of its interests in Justice.
Ackman will personally own a one percent equity stake in the combined company, according to a person familiar with the situation.
Franklin and Alan Parker, one of Justice Holdings' independent directors and former chief executive of Whitbread Plc (WTB.L), Britain's largest hotel and restaurant company, will join Burger King's board of directors once the deal closes.
Tegris Advisors acted as lead mergers and acquisitions financial advisors to Justice Holdings and Barclays Capital Inc. rendered a fairness opinion to Justice's board of directors.
(Additional reporting by Lisa Baertlein in Los Angeles, Chris Jonathan Peters in Bangalore and Matthew Goldstein in New York; Editing by Richard Pullin)