VOL. 116 | NO. 234 | Thursday, December 5, 2002
Diageo says burger deal about done
says burger deal about done
Britain's Diageo expects to sell its Burger King chain this month to a Texas
Pacific consortium despite one of the main franchisees, AmeriKing, filing for
Chapter 11 bankruptcy protection, industry sources said Wednesday.
Diageo's period of exclusive talks with the Texas Pacific
group ends at the close of the year, and sources said Diageo does not expect
the exclusivity period to be extended or other potential buyers to be invited
The news sent Diageo's shares traded in the Londons FTSE
100 more than 10 pence higher.
The London-based group agreed in July to a sale price of
$2.26 billion, but last month, Texas Pacific cut the price it was willing to
pay to $1.5 billion amid difficulties in financing the deal.
Sources told Reuters the Chapter 11 filing of AmeriKing did
not come as a surprise given the current price war between fast food groups in
the United States, especially the top two McDonald's Corp. and Burger King
and it would not derail Diageo's sale of Burger King.
AmeriKing is the largest independent Burger King franchisee
in the United States, with 361 restaurants located primarily in 12 Midwestern
and Southern states.
Diageo still expects to sell Burger King in a clean deal,
but the company might be forced to take an equity stake in the buying
consortium, which includes Bain Capital and Goldman Sachs Capital Partners, to
complete the sale.
The $2.26 billion price agreed upon in July was dependent on
Burger King's trading performance until the deal was closed, but in late
October, Diageo warned that price wars in the United States had led to a
deterioration of Burger Kings business.
The dip in Burger King trading has caused problems for
bankers at JP Morgan Chase and Salomon Smith Barney also part of the buying
consortium in raising the necessary debt funding, sources said.