Renewal of Burger King
Burger King Corp., purchased by Bain Capital of Boston and other private equity investors three years ago, will put itself on the public menu.
Burger King yesterday disclosed plans to file paperwork for an initial public stock offering later this month or early in March. It didn't say how much of the company would be sold in the offering.
The nation's number two hamburger chain has been owned by a variety of companies and investors over the past 52 years, from a pair of founding restaurateurs in Miami to food industry giants like Pillsbury Co. But an IPO would make Burger King a public company on its own for the first time. Competitors McDonald's Corp. and Wendy's International Inc. have been publicly traded companies for decades.
Burger King's business was struggling badly when Bain, Texas Pacific Group, and Goldman Sachs Capital Partners purchased the sagging company from British liquor conglomerate Diageo PLC for $1.5 billion in December 2002. The investors put in about $300 million of their own cash and borrowed the rest.
An IPO would reflect a dramatic boost in the value of their Burger King investment. A public stock offering reportedly would attempt to value Burger King at about $2.5 billion, not including debt. McDonald's has a market value of nearly $45 billion, and Wendy's stock is worth $6.9 billion. The stock market has shown some appreciation for fast-food stock stories. McDonald's, the larger rival with problems of its own three years ago, has bounced back. McDonald's stock, which hit bottom three months after the Burger King sale to private investors, has nearly tripled in value since.
Just last week, McDonald's sold shares of its fast-growing Chipotle Mexican Grill Inc. chain to an enthusiastic market. Chipotle shares, sold for $22 each in the IPO on Jan. 26, closed yesterday at $46.56.
Wendy's is considering a similar strategy for its Tim Hortons coffee and doughnut chain.
Burger King has been a high-profile investment in Bain's portfolio of food service companies. The investment firm bought Domino's Pizza Inc. from the company's founder in 1998. It joined Thomas H. Lee Partners and the Carlyle Group last month to spend $2.4 billion for Dunkin' Brands, the company that operates Dunkin' Donuts, Baskin-Robbins ice cream, and Togo sandwich shops.
Burger King's business has clearly improved since private equity investors bought it, especially during the past two years, and sales have increased in each of the past seven quarters. Still, most food industry analysts and consultants describe Burger King as a company making improvements with a long way to go.
The company has made efforts to improve Burger King's food and expand its menu. Its more recent advertising and promotional campaigns are generally considered upgrades.
Burger King also has spent several years trying to improve finances and relations with independent franchisees who operate more than 90 percent of Burger King's 11,000-plus restaurants. Results have been mixed.
The company embarked on a recapitalization plan for some franchisees to improve their finances, but several big operators have gone bankrupt in the last few years. Franchisees have long complained about Burger King's revolving-door management, which produced poor results. Current chief Greg Brenneman, who arrived in 2004 with solid credentials, appears to be staying and an IPO would help cement him in the job.
But Burger King's relationship with franchisees is hardly hearts and flowers now. The company cut its ties with a big association of franchisees last fall and efforts to patch up their differences have been strained.
Burger King won't be home-run material for IPO investors. But it will be an important step for the company and a big win for investors who bought their whoppers at the bottom of the market three years ago.
Steven Syre is a Globe columnist. He can be reached at syre@globe.com. 
