Burger King Announces Plans to Go Public

Burger King Holdings Inc., parent of the second-biggest hamburger restaurant chain, Wednesday announced its long-awaited initial public offering and said it will file a registration statement with U.S. securities regulators by early March.

The company, which was widely expected to pursue an IPO, said it had no further comment beyond its brief statement, citing limitations imposed by the Securities and Exchange Commission.

"Our goal has always been to take Burger King public," Chairman and Chief Executive Greg Brenneman said in the statement. "We believe the transparency and stability in ownership offered by being a public company will benefit our employees and franchisees for years to come."

Private equity investors Texas Pacific Group, Goldman Sachs Capital Partners and Bain Capital bought Burger King from British drinks company Diageo Plc in 2002 for about $1.5 billion.

Since then, Burger King has improved sales at its 11,000 restaurants and returned to profitability thanks to new menu items like the Angus steak burger and its omelet sandwich and quirky ads targeted at young, male consumers.

The chain, which competes with McDonald's Corp. (MCD) and Wendy's International Inc. (WEN), had suffered from a lack of identity in consumers' minds, shaky franchisee relations, and high executive turnover.

Brenneman, a turnaround specialist who in 2004 became the chain's ninth CEO in 15 years, said last year that the sale of Dunkin' Donuts by French spirits maker Pernod Ricard could help set a strong market for Burger King's IPO.

One restaurant expert called the move premature, saying consistency among Burger King's mostly-franchised restaurants was still lacking.

"Is this a company that is being built for the long-run or is it being built for an IPO?" said Malcolm Knapp, president of research firm Malcolm M. Knapp Inc. "This is a premature thing... it takes a fair amount of time to build strength back in the franchises operationally and they are not there yet."

Restaurant consultant Hal Sieling, of Carlsbad, Calif.-based Hal Sieling and Associates, agreed that Burger King still has more work to do to solidify its turnaround.

"It's probably an improving picture, but not still a great picture for them," Sieling said.

Francis Gaskins, president of IPO Desktop, a Los Angeles-based independent research firm, said Burger King's move appeared timed to take advantage of investor interest in restaurants following the runaway performance of shares in Chipotle Mexican Grill Inc. (CMG), which McDonald's spun off last week. Chipotle shares doubled in their market debut, the best performance of a U.S. IPO in 2006.

"It's no coincidence, but it's not apples to apples," Gaskins said.

"Burger King is middle-aged, and Chipotle is like an adolescent," with higher growth prospects, he said.

Until Burger King files documents detailing its financial performance, balance sheet and the number of shares on offer, it is hard to calculate a meaningful valuation for the shares.

A key thing for investors to look for, he said, is whether Burger King's owners leave it burdened with a heavy debt load.

"Normally the balance sheet has been stretched to the maximum by the private funds," Gaskins said. "Chipotle had a clean balance sheet."