06 March 2017

Restaurant Brands to acquire Popeyes

Restaurant Brands International (RBI) announced on 21st February that it would acquire fried chicken fast food chain Popeyes Louisiana Kitchen (Popeyes) just days after its parent 3G Capital abandoned a USD 143,000 million deal to buy Unilever through Kraft Heinz.

With debt financing from JP Morgan and Wells Fargo, the buyer will pay USD 79.00 per share, representing a 19.5 per cent premium over Popeyes’ close on 20th February, the last trading day prior to the deal being announced. Valued at USD 1,800 million, the takeover is the sixth largest among deals that target restaurant operators worldwide, according to data compiled by Zephyr, the M&A database published by Bureau van Dijk.

Listed on Nasdaq, Atlanta-based Popeyes currently operates and franchises more than 2,000 restaurants globally, with 1,600 of them being in the US.  The company has seen consistent annual growth in the past few years, having posted USD 269 million in 2016, up 50.4 per cent on the USD 179 million reported four years ago. Similarly, net income for the period totalled USD 43 million, a 40.8 per cent increase from USD 30 million in 2012.

Backed by private equity firm 3G Capital, New York Stock Exchange-listed RBI was originally formed to hold Burger King and Tim Hortons after the two fast food chains underwent a CAD 12,482 million merger in 2014. The transaction was also funded by tycoon Warren Buffett’s Berkshire Hathaway, which purchased around USD 3,000 million-worth of preferred shares in RBI.

3G Capital’s investment strategy typically involves buying businesses that are highly concentrated in a specific region, in hopes of expanding them into new markets for further growth, according to the Wall Street Journal. This is also in line with the private equity giant’s move to merge HJ Heinz and Kraft Foods in 2015, with Kraft Heinz now being the amalgamated entity. The ketchup maker’s global presence was thought to be a good complement to the US-focused Mr Peanut manufacturer. RBI currently sees huge growth potential in Asia for Popeye’s business, which will also serve to diversity the buyer’s holdings of Burger King and Tim Hortons, the newspaper reported.

“With this transaction, RBI is adding a brand that has a distinctive position within a compelling segment and strong US and international prospects for growth.” said the buyer’s chief executive Daniel Schwartz, “We look forward to taking an already very strong brand and accelerating its pace of growth and opening new restaurants in the US and around the world.”

Popeyes has appointed King & Spalding, Genesis Capital and UBS to the deal, while Paul Weiss Rifkind Wharton & Garrison is assisting RBI.

© Zephyr