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Burger King Sold to Buyout Group

July 26, 2002|MARC BALLON | TIMES STAFF WRITER

Burger King Corp. has been sold by its parent company to a buyout team for $2.26 billion in cash, a development that could help the nation's No. 2 burger chain stabilize operations and boost market share, analysts said.

British liquor company Diageo sold the chain to a consortium led by Texas Pacific Group, a Fort Worth buyout outfit that holds a majority stake in such companies as J. Crew Group Inc. and America West Airlines.

Texas Pacific is teaming with Goldman Sachs Capital Partners and Bain Capital to make the purchase. The consortium will not take on $1 billion in debt owed to Diageo.

Analysts said the deal is good news for Burger King. Texas Pacific is expected to pour money into such things as product development, training and technology to turn around the chain, which has been losing customers and market share for years amid instability in its executive ranks, said Randall Hiatt of Fessel International, a Costa Mesa restaurant consulting firm.

Unlike London-based Diageo, the new American owners will be "engaged so we can touch, feel and communicate with them on a regular basis," said Tony Versace, president of Multi King Corp., owner of 19 Burger King restaurants in Michigan and Illinois. Franchisees complained about being ignored by Diageo.

Texas Pacific plans to keep intact the current management team, which has pointed the Miami-based, 11,435-unit chain in the right direction, said Allan F. Hickok, an analyst with US Bancorp Piper Jaffray in Minneapolis.

Under the direction of former Northwest Airlines Chief Executive John Dasburg, the company has rolled out scores of products, including the highly successful Chicken Whopper, which have helped boost same-store sales after years of declines.

Burger King has room for improvement. The chain's market share dropped to 18.5% last year, from 20.4% in 1998, according to Technomic Inc., a Chicago-based restaurant research and consulting firm.

And in national food surveys, Burger King places behind competitors Wendy's, Jack in the Box and Carl's Jr., Villa Park restaurant consultant Bob Sandelman said.

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