McDonald’s Rises on Speculation Ackman Is Building Stake

McDonald’s Corp. rose the most in nine months after activist investor Bill Ackman said the world’s largest restaurant chain could be managed better, fueling speculation that he’ll buy a stake and push for changes.

Ackman, whose Pershing Square Capital Management hedge fund was the second-largest investor in Burger King Worldwide Inc., said today that McDonald’s could learn from its smaller rival. He declined to comment on whether he was taking a stake in McDonald’s.

“If McDonald’s were run like Burger King, the stock would go up a lot,” Ackman said in an interview on Bloomberg Television.

McDonald’s rose 3.3 percent to $91.65 at the close in New York, the biggest one-day gain since March 11. Oak Brook, Illinois-based McDonald’s has fallen 5.5 percent this year.

McDonald’s welcomes investment in the company and is focused on boosting shareholder value by improving its menu and service while creating a “more nimble U.S. organization,” Becca Hary, a spokeswoman, said today in an e-mail. She declined to comment on whether McDonald’s had heard from Ackman.

Burger King completed its acquisition of Canadian coffee-shop chain Tim Hortons this month, becoming the world’s third-largest fast-food company and changing its name to Restaurant Brands International Inc. Ackman said that the company’s new name signals it is building a restaurant conglomerate that may make more acquisitions.

Burger King

Since being purchased by Brazilian private-equity firm 3G Capital Inc. in a $4 billion leveraged buyout in 2010, Burger King has sold off all but a handful of its company-owned restaurants to reduce costs. There are about 13,900 Burger King restaurants worldwide, and more than 99 percent are franchised. By contrast, about 90 percent of McDonald’s 14,200 U.S. locations are franchised.

Burger King more recently promoted value deals such as 10 packs of chicken nuggets for $1.49 and brought back customer favorites like chicken fries to lure American diners. The moves helped the company post a 3.6 percent gain in U.S. and Canadian same-store sales in the third quarter. McDonald’s had a 3.3 percent drop in U.S. same-store sales in the same period.

“There are some costs that could be taken out, but the real key is going to be driving same-store sales,” Jack Russo, an analyst at Edward Jones & Co. in St. Louis, said today in an interview. “When you see Burger King and Wendy’s up 1 to 2 percent and McDonald’s in the U.S. is down, it begs the question: What’s going on there?”

Russo, who recommends buying McDonald’s shares, said that while it’s difficult to know whether Ackman is taking a stake, his comments will spark speculation that he is.

McDonald’s also may be enticing to an activist because of its low valuation relative to peers. The company’s shares trade at about 18 times earnings, the third-lowest multiple among 26 U.S. restaurant peers with market values greater than $1 billion, according to data compiled by Bloomberg.

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