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McDonald’s Rises on Speculation Ackman Is Building Stake

Published on Dec 17 2014 7:21 PM in Restaurant

McDonald’s Rises on Speculation Ackman Is Building Stake

McDonald’s rose the most in nine months after activist investor Bill Ackman said the world’s largest restaurant chain could be managed better, fuelling 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, 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 advanced 2.7 per cent to $91.09 at 12:32 p.m. in New York and earlier climbed as much as 3.6 per cent for the biggest intraday gain since 11 March. Oak Brook, Illinois-based McDonald’s had fallen 8.6 per cent this year through yesterday.

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 US 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 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 per cent are franchised. By contrast, about 90 per cent of McDonald’s 14,200 US locations are franchised.

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

Bloomberg News, edited by Hospitality Ireland

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