Can I get a Whopper with two legs?
The parent of Burger King and Tim Horton's announces that it will pay $1.8 billion for Popeyes Louisiana Kitchen.
By Laura Berman
Restaurant Brands International Inc. (QSR) confirmed on Tuesday, Feb. 21, its long-awaited deal to acquire Popeyes Louisiana Kitchen Inc. (PLKI).
Restaurant Brands will pay $79 per share, or $1.8 billion, a 19.5% premium over Popeyes' Friday closing price of $66.12. The purchase price also represents a premium of 27% over Popeyes' volume weighted average price as of Feb. 10, when rumors first surfaced about the bid.
UBS's Brett Pickett and Lowell Strugg and Genesis Capital LLC's Jonathan Goldman provided financial advice to Popeyes, which tapped a King & Spalding LLP team led by Cal Smith as its outside counsel.
Restaurant Brands retained a Paul, Weiss, Rifkind, Wharton and Garrison LLP team led by Scott Barshay and Brian Lavin as its legal adviser for the deal and did not retain an outside financial adviser.
Restaurant Brands said in a statement that Popeyes will continue to manage itself in the United States "while benefiting from the global scale and resources of RBI," which "plans to continue developing the brand at an increasing pace in the U.S. and international markets in the years to come."
Popeyes has 2,600 locations in the United States and 25 other countries, while Restaurant Brands' Burger King and Tim Hortons brands are significantly larger. Burger King operates over 15,000 locations in the United States and 100 other countries, while Tim Hortons has 4,600 locations in the United States, Canada and the Middle East.
Restaurant Brands CEO Daniel Schwartz said on a conference call that Popeyes' U.S. locations average $1.4 million in revenues.
The formation of Restaurant Brands was one of the earliest major deals for 3G Capital, but pales in comparison to the Brazilian private equity firm's latest investments.
In 2010, 3G acquired Burger King Holdings Inc. in a deal valued at $4 billion, including debt, netting a handsome return for private equity backers TPG, Bain Capital LLC and Goldman Sachs Capital Partners, who retained a 31% stake after taking the company public in 2006. Two years later, 3G returned Burger King to public markets in a complex deal valuing the company at $8.1 billion.
3G made an even bigger splash in 2014, with Burger King agreeing to pay $11 billion for Canada's Tim Hortons Inc. Warren Buffett's Berkshire Hathaway Inc. (BRK.B) provided $3 billion of Burger King's $12.5 billion financing commitment. The combined company rebranded as Restaurant Brands in late 2014.
Buffett, who currently holds a 3.6% stake in Restaurant Brands, also teamed up with 3G in its $28 billion purchase of H.J. Heinz Co. in 2013. Heinz subsequently merged with 3G-backed Kraft Foods Group Inc. in a $55 billion deal to form Kraft Heinz Co. (KHC). While Kraft Heinz and 3G's acquisition appetites were the source of wide speculation, even company followers were shocked when the food giant on Friday offered $143 billion for Unilever plc (UN). The offer was quickly withdrawn.
3G also orchestrated the formation of Anheuser-Busch InBev SA/NV (BUD) through a series of acquisitions culminating in a $107 billion deal with SABMiller plc closing Oct. 10.
On the conference call, Restaurant Brands CFO Joshua Kobza said that Popeyes "is growing at a similar pace as Burger King was in 2010," when 3G acquired the brand. "Back then Burger King was growing approximately 170 net new restaurants per year," he said. "And over the course of the past six years, we've been able to increase the pace of growth to 735 net new restaurants per year as of 2016."
Popeyes specializes in fried chicken. Kobza added that chicken is "a popular category across the world," with particular growth potential in Asia.
Restaurant Brands will finance the deal, which is expected to close in April, with cash on hand and financing committed by J.P. Morgan and Wells Fargo. The Oakville, Ontario-based company had cash and equivalents of C$1.948 billion ($1.495 billion) as of December.
King & Spalding's Rob Leclerc, Jeff Stein, Elliot Tapp and Zach Cochran also advised Popeyes. Sonny Cohen was in-house counsel to Popeyes.
The firm, also based in Atlanta, is Popeyes' longtime corporate counsel. Stein was issuer counsel on the 2001 IPO of AFC Enterprises Inc., Popeyes' corporate predecessor, while Cohen practiced at King & Spalding before going in-house at Popeyes. King & Spalding also advised AFC when it sold Seattle Coffee Co. to Starbucks Corp. (SBUX) for $72 million in 2003.
Paul Weiss's Jeffrey Samuels, Alyssa Wolpin and Robert Killip advised 3G on Burger King's acquisition of Tim Hortons; Samuels advised 3G on Kraft Foods' merger with Heinz. Barshay, then of Cravath, Swaine & Moore LLP, also advised 3G and Heinz on the Kraft Foods merger and then joined Paul Weiss on April 3.
