American meal if there ever was one — could soon have a distinctly Brazilian flavor.
Burger King Has Suitors From Brazil
Burgers and beer — an American meal if there ever was one — could soon have a distinctly Brazilian flavor.
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Burger King Holdings is in advanced talks to sell itself to 3G Capital, a Brazilian investment firm.
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Burger King Holdings is in advanced talks to sell itself to 3G Capital, a little-known investment firm based in New York and backed by wealthy Brazilian deal makers who also control a large stake in the world’s largest brewer, in the latest sign of Brazil’s ascendance in the corporate world.
A deal is expected to be struck as early as Thursday morning for more than $2.7 billion, say people involved in the deal who requested anonymity. These people cautioned that it was possible that talks could still collapse.
The pursuit of such an American icon and the rich price that has been offered — a more than 20 percent premium from Burger King’s closing stock price Tuesday — illustrate the emerging power of Brazilian finance.
Brazil, along with Russia, India and China, the other so-called BRIC countries, is widely expected to be among the dominant global economies in the coming decades. And its economic advance has been accompanied with a rise on the global mergers-and-acquisitions scene.
Brazilian companies, armed with relatively strong balance sheets and backed by a vibrant domestic economy, have been growing by snapping up or merging with companies abroad. Brazilian corporate buyers and sellers have struck $51.4 billion worth of deals in 2010, putting Brazil on pace for record M.& A. volumes this year, according to data provider Capital IQ. By comparison, 2005 saw $10.1 billion worth of Brazilian deals.
Last month, the two largest airlines in South America, TAM of Brazil and LAN of Chile, merged in a $2.7 billion deal. And Brazilian companies have been looking north as well. The Brazilian beef company JBS last year paid $800 million for a majority stake in Pilgrim’s Pride, the Texas chicken company.
Burger King’s potential buyer, 3G Capital, is backed by Brazilian investors, including the billionaire Jorge Paulo Lemann. The firm views Burger King as a turnaround opportunity, one that draws upon the operational expertise gained in its beer and retail investments, the people close to the deal said.
If it succeeds in acquiring Burger King, 3G plans on building out the fast-food chain internationally, these people said. Burger King already has 93 restaurants in Brazil and plans to open about 500 new franchises in Latin America over the next five years, the company disclosed in a regulatory filing.
3G already has some experience in burgers and fries, having previously invested in Wendy’s.
The investment firm’s point person on the deal is Alexandre Behring, the former chief executive of one of Brazil’s largest railroad operators.
Another 3G principal, Mr. Lemann, is best known for his major role in the $52 billion merger of the Brazilian-Belgian beer giant InBev with Anheuser-Busch. He and his partners serve on Anheuser-Busch InBev’s board.
The 71-year-old Mr. Lemann, who is No. 48 on Forbes magazine’s list of billionaires with an estimated net worth of $11.5 billion, earned his first fortune as a financier. In 1971, he acquired a small firm and built it into Banco de Investimentos Garantia, one of Brazil’s largest investment banks, before selling it to Credit Suisse in 1998 for $675 million.
In 1989, he and his business partners gained control of a Brazilian brewery that grew into AmBev. The company later merged with Interbrew in 2004 to create InBev. (Carlos Brito, the InBev chief executive who led the company’s merger with Anheuser Busch, is a key lieutenant of Mr. Lemann.)
The business partners founded GP Investments, one of Latin America’s largest private equity firms, in 1993 but sold the firm to their younger partners earlier this decade.
Mr. Lemann, a former Brazilian tennis champion who competed at Wimbledon, lives in Switzerland but spends much of his time in Brazil and the United States. Warren E. Buffett has called him a “good friend.”
If 3G was to acquire Burger King, it would be snapping up a company that has lately struggled. Last week it forecast weak demand for its new fiscal year amid high unemployment in the United States and economic weakness in Europe. It also cautioned that uncertainty regarding the costs of wheat and beef could affect its results.
A spokeswoman for Burger King said that the company did not comment on rumors or speculation. A spokesman for 3G declined to comment.
Since its 2006 initial public offering, shares of Burger King had fallen about 6 percent before news of a potential sale, according to Standard & Poor’s. During the same period, McDonald’s stock has climbed 111 percent.
In Wednesday trading, the stock of the Miami-based fast-food chain closed up $2.41, or about 15 percent, at $18.86, rising after news emerged in the morning of a possible deal.
A deal for Burger King would be the second time the company was taken private in the last decade. A consortium of buyout firms — TPG, Bain Capital and Goldman Sachs Group’s private equity unit — took the company private in 2002 for $1.58 billion. Burger King sold shares in a 2006 initial public offering, but the consortium still owns about a third of the company.
At Burger King’s current valuation, the private equity firms have made more than three times their initial investment.
Best known as the home of the Whopper sandwich, Burger King was founded in 1954 in Miami by two entrepreneurs who in 1967 sold the chain to the Pillsbury Company. The food company Grand Metropolitan of Britain acquired Pillsbury in 1988. After Grand Metropolitan bought Guinness in 1997, it formed Diageo.
Private equity investors have lately shown a keen interest in restaurants. In the spring, the Apollo Management Group and Thomas H. Lee Partners battled each other for CKE Restaurants Inc. Apollo prevailed, paying $694 million for the operator of the Carl’s Jr. and Hardee’s fast-food chains. California Pizza Kitchen also announced this year that it was up for sale and had received interest from private equity firms.
Michael J. de la Merced contributed reporting.
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