Restaurant Brands International Inc agreed to buy Popeyes Louisiana Kitchen Inc for about $1.8 billion, adding a fried-chicken chain to its lineup of burgers and doughnuts.
The cash offer of $79 a share represents a 19 per cent premium to Popeyes’ closing price on Friday. The deal is expected to close by early April, the companies said.
The acquisition would be the first major deal for Restaurant Brands, which was formed in the 2014 merger of Burger King and Tim Hortons. The company’s managers have long said they would consider taking over other brands, where they could boost profit by cutting costs and selling locations to franchisees. Restaurant Brands, backed by Brazilian private equity firm 3G Capital, also may look to expand the chain abroad.
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“Restaurant Brands may be able to cut selling, general and administrative expenses in half in the next two years, and its private equity partners can boost international expansion as spicy flavors, chicken and rice tend to travel well,” said Michael Halen, an analyst at Bloomberg Intelligence. “It fits right into the 3G playbook.”
Restaurant Brands shares rose 5.4 per cent to $56.80 at 933 am in New York. The stock already was up 13 per cent this year through Friday. Popeyes surged 19 per cent to $78.79.
Popeyes, which has more than 2,600 restaurants in the US and 25 other countries, has performed well lately, with the stock gaining for eight years in a row. Chief executive officer Cheryl Bachelder has improved relationships with franchisees, sped up service times and played up the brand’s New Orleans heritage with foods such as Magnolia Blossom Chicken. The chain will continue to be independently managed in the US, Restaurants Brands said.
The transaction is being paid for with cash on hand and a financing commitment from JPMorgan Chase & Co and Wells Fargo & Co. The company was advised by Paul, Weiss, Rifkind, Wharton & Garrison. Popeyes received financial advice from UBS AG and Genesis Capital and got legal counsel from King & Spalding.
News by Bloomberg, edited by Hospitality Ireland