Burger King stock is back -- without an IPO

Just 18 months after going private, the home of the Whopper relists as BKW on the NYSE.

By InvestorPlace Jun 20, 2012 9:32AM
By Jeff Reeves

Lately, investors should have plenty of examples of how stocks are born via an initial public offering. In the case of Facebook (FB), we saw in painful detail how a fast-growing tech company can go from Internet darling to IPO flop overnight. Other big offerings of various success in the past few months include organic foods giant Annie's (BNNY) and investment powerhouse Carlyle Group (CG).


But not all companies reach the bright lights of Wall Street via an IPO. In the case of Burger King, which was taken private in 2010 for $3.3 billion, it avoided the complicated path that Facebook and Annie's followed to the stock market.


Burger King, which will trade under the symbol BKW on the NYSE, is avoiding an IPO altogether. And it started trading again Wednesday.


Burger King is using a convoluted deal structure to pull this off. To gain access to Wall Street, it is merging with an existing stock that already trades publicly.


That stock is Justice Holdings, a U.K. investment entity that trades on the London Stock Exchange. Burger King's private ownership group, 3G Capital, received $1.4 billion from Justice for a minority stake in BKW, and Justice in turn will suspend its stock, change its name to Burger King Worldwide and then re-list those shares in New York.


3G Capital still has a 71% stake in the company and hopes to see a nice profit on its initial $3.3 billion investment in Burger King.


Sound overly complicated? Well, according to IPO expert Tom Taulli, these kinds of financial acrobatics are common practice at the home of the Whopper.


"When it comes to financial engineering, Burger King is a pro," Taulli writes on the IPOPlaybook blog. "The company went private in 2002 in a $1.58 billion deal. The private equity sponsors included TPG, Bain Capital and Goldman Sachs (GS). Four years later, Burger King pulled off an IPO. Then in 2010, it went private again in a transaction worth $3.3 billion" to 3G Capital.


Why all these deals? Why, to make the private owners rich, of course! Every time someone can buy Burger King and sell it for a profit, he gets a huge payday.


But what does this mean for consumers and investors? Strangely enough, every buyout and reformulation of BK involves an effort to reconnect with customers and make the restaurant more competitive.


Take the latest changes in the past year or two at Burger King:

And those are just a few of the plans.


Whether consumers will ever connect with the changes is the big question. However, at least the private-equity folks have done more than simply cut back on salaries and portion sizes to wring more profits out of Burger King operations.


But if you like what you see (and taste), the good news is you won't have to wait months for Burger King to go public. Shares are hot and fresh this week.


Of course, just because this company wasn't a traditional IPO doesn't mean investors won't be as skeptical of this newly minted stock as they are of every other new name on Wall Street. The fact remains that without a decent group of quarterly reports to pore over, investors are flying mostly blind.


And given the broader market uncertainties right now, few folks seem willing to stick their necks out on these kinds of investments.


Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor's Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, Reeves does not own any stocks named here.


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3Comments
Jun 20, 2012 1:16PM
avatar

No wonder the stock market is so screwed up.  Burger King is not going to be around much longer if they do not start paying attention to the food they are selling.  BK was once my favorite place to eat and now I would not give their food to my dog; nothing but greasy, burnt bad tasting crap now.  I for one will never eat at another BK.

Jun 21, 2012 2:08AM
avatar
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Jun 21, 2012 2:08AM
avatar
Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH
STRATEGIST™. She has won over 2 dozen national and statewide
“entrepreneur of the year” awards for the resilient growth of her
international businesses across 4 recessions. Her midsized BtoB clients
get on…and then stay on…the published lists of the fastest growing
privately held companies. She owns and operates a suite of companies
that help privately held midsized companies achieve accelerated growth
with sustained profitability® through opportunity & resource
analysis, strategic planning, executive advisory services, growth
financing, and targeted search. 2012 is Ambler’s 8th year hosting a
weekly peer-to-peer-to-peer syndicated on line talk show that features
interviews with CEOs/Presidents of midsized companies (typically between
$20 and 200 Mil/yr) sharing success tips about the growth
strategy-of-the-week. An archive of over 300 interviews is available at
www.GrowthStrategistShow.com. She can be reached toll free at
1-888-Aldonna or at Aldonna@AMBLER.com. You Can visit her site
http://www.ambler.com
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