BKW receives kingly welcome at NYSE

In less than two years Brazilian private equity firm 3G Capital was looking at more than a threefold paper return on its investment in Burger King Worldwide Inc. Wednesday, June 20, when the burger chain's stock listed on the New York Stock Exchange.

The Miami-based company began trading 90 million shares under the symbol BKW, and by midday they had gained 2.4% to $14.85.

The transaction, which gives Burger King an enterprise value of about $8 billion, allows 3G to partially exit its investment, selling a 29% stake for $1.4 billion to Justice Holdings Ltd., which will suspend its trading in London and will trade in New York as Justice Delaware Holdco Inc.

"Since the business is based in the U.S., there was really no value in having an additional listing in London," said a source with knowledge of the situation, adding the investors had opted for this structure, since it would take only three weeks to list, while an IPO would have taken longer. The structure also gave 3G more certainty to realize a return on its investment.

Justice was founded in February 2011 as a publicly listed investment vehicle to do a transaction valued between $2 billion and $10 billion. The entity was formed by Martin E. Franklin, founder and executive chairman of Jarden Corp., a consumer products company listed on the NYSE; Alan Parker, former CEO of Whitbread plc, the U.K.'s largest hotel and restaurant company; and William Ackman, founder and CEO of New York hedge fund Pershing Square Capital Management LP. Ackman's fund owns 12% of Burger King Worldwide. Franklin and Parker will both sit on Burger King's board.

Founded in 1954, Burger King now operates 12,534 restaurants in 82 countries; more than 90% are franchisees. Most of the company's income comes from royalties based on a percentage of the franchisees' sales and income from properties leased to franchisees. The company's total revenue in 2011 was $2.6 billion.

In October 2010 3G took Burger King private in a deal valued $4.2 billion, investing about $1.56 billion of equity in the leverage buyout. The sponsor has now recouped most of the equity, and its outstanding shares are worth about $3.6 billion based on today's share price.

After the Justice deal was announced in April, Ackman praised 3G's management of the company. He noted that under 3G, Burger King's Ebitda before capital expenditure had increased from $320 million in 2010 to $503 million in 2011, with 2012 Ebitda before capital expenditure expected to nearly double that of 2010.

The transaction marked the fourth sale within a decade for Burger King, which Ackman noted has had 13 CEOs within the past 25 years.

Before the 3G buyout in October 2010, TPG Capital, Bain Capital LLC and Goldman, Sachs & Co. held a combined stake of about 31%. The firms had acquired Burger King in 2002 from Diageo plc for $1.5 billion and held an IPO for the business in 2006.

The company's 349.9 million common stock is now worth about $5.1 billion, and it has about $2.9 billion of long-term debt on its balance sheet.

Tegris Advisors acted as lead M&A financial advisers to Justice on the transaction. Barclays rendered a fairness opinion to Justice's board. Kirkland & Ellis LLP acted as legal counsel to Burger King Worldwide and 3G Capital. Greenberg Traurig PA and Sullivan & Cromwell LLP acted as counsel to Justice on the transaction.