Burger King shares rise in return to NYSE

(Reuters) - Shares in Burger King Worldwide Holdings Inc rose as much as 11 percent in their first day of trading on Wednesday, as the world’s second-biggest fast-food hamburger chain made its return to the New York Stock Exchange.

Burger King signs at a restaurant in Annandale, VA, August 24, 2010. REUTERS/Kevin Lamarque

Stock in the chain known for its “Whopper” hamburgers debuted at $14.50. It touched a session high of $16.11 before retreating to $15, a gain of 3.4 percent.

The Miami-based company’s return to the stock market comes less than two years after it was taken private in a $3.26 billion sale to Brazilian investment fund 3G Capital Management LLC and at a time when restaurants are struggling to make gains against fast-food leader McDonald’s Corp.

The restaurant operator on Wednesday closed a “reverse-merger” in which Justice Holdings, a publicly traded shell company co-founded by hedge fund veteran Bill Ackman, absorbed Burger King.

3G will receive about $1.4 billion in cash under the deal and has retained a roughly 71 percent stake in the public company.

Justice shareholders and founders own a 13 percent stake in Burger King, and 16 percent of the shares are freely trading, Burger King Chief Financial Officer Daniel Schwartz told Reuters.

When the transaction was announced in April, Justice said it expected Burger King’s core profits in 2012 to almost double from 2010.

“It’s a new company with a much more aggressive strategy, both domestically and internationally,” Schwartz said.

The company, has slashed costs, sold restaurants to franchisees, begun a renovation push and revamped its menu with limited-time options, as well as staples like salads and high-margin drinks like smoothies.

Burger King recently ceded its rank as the second largest U.S. hamburger chain to Wendy’s Co and trails McDonald’s by a wide margin.

“We believe there is an opportunity to narrow the sales gap, or close the sales gap, from where we are today versus our competitors,” Schwartz said.

Burger King historically has opened units at a rate of around 250 per year and Schwartz said the company could increase that rate of growth.

The company, which was founded in 1954 and has more than 12,500 locations around the world, has announced expansion deals in fast-growth countries like Brazil, Russia and China, but it has not yet issued specific earnings or revenue targets.

It is running U.S. television ads starring soccer icon David Beckham and actress Salma Hayek.

Analysts say U.S. menu changes and the other moves appear more defensive than innovative and don’t believe that Burger King was private long enough for its owners to turn around operations.

Analysts said they have heard plans about international growth before and are taking a wait-and-see approach to company statements that it has fixed its previously dysfunctional relationship with franchisees.

Among other things, Burger King’s U.S. franchisees sued the company in 2009 over its $1 cheeseburger deal, which the franchisees said was hurting their profits.

While the company is known for its flame-broiled hamburgers, its menu historically has appealed to a narrower audience than McDonald’s, which also is more convenient because it has nearly three times more restaurants around the globe.

“It could be a gold mine here, if they deliver what they say they can over the next five years,” Investment Technology Group restaurant analyst Steve West said on Wednesday.

“But, buyer beware, it could be a disaster. There is significant execution risk in this name,” West said.

Reporting By Lisa Baertlein in Los Angeles and Nivedita Bhattacharjee in Chicago; Editing by Gerald E. McCormick and Carol Bishopric