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Burger King Rises After Report of Buyout Firm Talks

Sept. 1 (Bloomberg) -- Burger King Holdings Inc. rose the most in more than four years in New York trading after the Wall Street Journal said the fast-food chain is in talks with buyout firms on a possible sale.

Potential investors in the Miami-based chain include 3i Group Plc, the newspaper said, citing unidentified people familiar with the matter. London-based 3i declined to comment on the speculation.

The hamburger chain, second only to McDonald’s Corp. in the U.S., had a market value of more than $2.2 billion as of yesterday. A buyout might help Burger King repair relations with franchisees and allow the chain to differentiate itself from McDonald’s, said Janney Capital Markets’ Mark Kalinowski.

“We’ve seen quite a bit of private-equity interest in the restaurant space already this year,” said New York-based Kalinowski, who rates Burger King shares neutral. “At this point in Burger King’s history, it may be better off out of the public eye to solve some of the big challenges it faces.”

Wendy’s/Arby’s Group Inc., the third-biggest U.S. fast-food company, attracted interest from possible buyers this year, according to investor Trian Fund Management LP. The shareholder, Wendy’s/Arby’s largest, said in June that it was approached about participating in a takeover of the Atlanta-based chain.

Burger King rose $1.90, or 12 percent, to $18.35 at 9:58 a.m. in New York Stock Exchange composite trading. The shares earlier surged as high as $19.04, the most since May 2006, when the company went public.

Eating Out

Burger King, led by Chief Executive Officer John Chidsey, also operates in Latin America, Europe and parts of Asia. Sales growth has slowed in back-to-back years as more consumers opted to eat at home to cope with a deepening economic slump. Burger King spokesman Miguel Piedra declined to comment.

If Burger King were to fetch $19.50 a share, that would give the chain a valuation of about 6.3 times Kalinowski’s 2011 estimate for earnings before interest, taxes, depreciation and amortization, he said. Some restaurant chains have fetched multiples of six to 10, he said.

Total sales fell 1.4 percent to $2.5 billion in the year ended June 30, Burger King said last week. The chain gets about two-thirds of its revenue from the U.S. and Canada.

“Any improvement at BKC would need to be topline-driven and would require significant investment,” Sara Senatore, an analyst at Sanford C. Bernstein & Co. in New York, said in an e-mail. She rates Burger King “market perform.”

TPG Inc., Bain Capital LLC and Goldman Sachs Group Inc. bought Burger King from Diageo Plc in 2002 before selling shares to the public again four years later. Those three companies owned about one-third of Burger King as of June 30, according to the latest data compiled by Bloomberg.

To contact the reporter on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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