Exclusive: Whataburger explores options including a stake sale - sources

(Reuters) - Privately held U.S. fast-food chain Whataburger is exploring options that could include selling a minority stake to a financial investor or private equity firm, people familiar with the matter said on Monday.

With the majority of its locations in Texas, Whataburger lacks the broader, national recognition of chains such as Shake Shack Inc and In-N-Out Burger, but it is larger than both, according to rankings published by trade magazine QSR. It could fetch a valuation of more than $6 billion, according to one of the sources.

San Antonio, Texas-based Whataburger has hired investment bank Morgan Stanley to manage the process, the sources said, requesting anonymity because the details are confidential.

The sources asked for anonymity and cautioned that there is no certainty a deal will happen.

“Our company is growing and is always attractive to investors, we constantly get inquiries,” Whataburger said in a statement. “We have always evaluated the opportunities that can accelerate growth and maintain the success of our brand, and we will continue to do so in the future.”

Morgan Stanley did not immediately provide comment.

A stake sale could help Whataburger’s founding family take some cash out of the business without surrendering control. An influx of new money could also potentially help the classic-style chain invest more in preparation technology and delivery as fast-food chains try to make themselves more attuned to their customers with speed and ease.

Whataburger was founded by Harmon Dobson in 1950 and is known for its distinctive five-inch burger buns. The company has said that it has more than more than 820 locations with sales totaling more than $2 billion.

Overall, Whataburger is the seventh biggest U.S. burger chain based on 2017 sales, after the likes of McDonald’s, Burger King and Wendy’s, according to QSR.

A deal for a stake in Whataburger would come amid a surge of strategic activity in the restaurant sector, as conventional fast-food companies hit their limit on organic growth and private equity looks to deploy capital into the space.

Last month McDonald’s made its first acquisitions in two decades, announcing in quick succession the purchase of a personalized data start-up and a minority stake in a mobile app vendor.

(The story in sixth paragraph, corrects to say Morgan Stanley did not immediately provide a comment, not that it declined to comment.)

Reporting by Joshua Franklin in New York; Additional reporting by Harry Brumpton; Editing by Leslie Adler