Burger King considers buyout offer

Franchisees have complained of slim profit margins on flat domestic sales and ineffective marketing.

Yahoo News
April 17, 2001

Burger King considers buyout offer
Catherine Wilson

MIAMI (AP) - Under pressure from franchise owners to go private, new Burger King CEO John Dasburg said Thursday that the second-largest fast-food chain has talked with a leveraged buyout firm.

The Diageo PLC subsidiary has been talking for months about a Burger King spinoff in the next few years. Whatever the form, Dasburg said it will be next year.

Restaurant owners initially suggested a sale to get speedy change, but have been pushing more recently for an LBO to allow the home of the Whopper to improve slowly and quietly without being under Wall Street's microscope.

“It is true that I have had a conversation with Texas Pacific Group,” a Fort Worth, Texas, company known for turnarounds, Dasburg said. “One of the other responsibilities I have is to review the alternatives and present a view to Diageo.”

Texas Pacific spokesman Owen Blicksilver declined comment. He said the “firm does not comment on rumors, only on transactions.”

Steven Lewis, president of Burger King's National Franchisee Association, agreed Thursday that he had been pushing for a standalone company, but declined to comment “at this point in time.”

On the day of Dasburg's appointment, Burger King, a perennial second to industry-leading McDonald's, issued a poor financial report: operating profits down 7 percent to $143.5 million and comparable store sales down 6 percent in the last half of 2000 compared to the year before.

Franchisees have complained of slim profit margins on flat domestic sales and ineffective marketing.

One of Dasburg's first priorities is to bring more customers into Burger King's 11,340 restaurants to boost $11.4 billion in annual sales.

Dasburg, who quit as Northwest Airlines' CEO two months ago, also announced a sweeping management restructuring that drops geographic divisions and puts more emphasis on centralized controls and functional assignments.

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