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Burger King serves up solid public offering

Shares of Burger King’s parent company rose 3 percent from their initial public offering price Thursday, in their first day of trading.
John W. Chidsey
Burger King’s ‘The King’ mascot arrives at the New York Stock Exchange Thursday.Richard Drew / AP
/ Source: The Associated Press

Shares of Burger King’s parent company rose 3 percent from their initial public offering price Thursday, in their first day of trading.

“It’s a historic day for Burger King,” CEO John Chidsey said. “We’ve been waiting 52 years for this day. It’s an honor for us to finally be public.”

Burger King Holdings Inc. sold 25 million shares of common stock at $17 each in its IPO that was completed late Wednesday. The shares represent about 19 percent of the company’s total, putting its overall value at about $2.25 billion.

But that still leaves the nation’s second-biggest hamburger chain far behind its two biggest rivals — McDonald’s Corp., which has a market value of about $43 billion, and No. 3 Wendy’s, which is worth about $7 billion.

Its shares rose 50 cents to close at $17.50 on the New York Stock Exchange under the symbol BKC. They traded as high as $18.15 earlier in the day.

Burger King raised $393 million in net proceeds from the offering to pay off debt. The total value of the IPO was $425 million before underwriters’ commissions and fees. That makes it one of the biggest restaurant IPOs, according to Thomson Financial.

In March, Canadian coffee and doughnut chain Tim Hortons raised a net of about $672 million for a 15 percent stake in the company, which had been wholly owned by Wendy’s International Inc.

Analyst Sam Snyder of the Greenwich, Conn.-based IPO research firm, Renaissance Capital, called the debut modest but expected.

He compared Burger King’s offering to McDonald’s unit Chipotle Mexican Grill Inc., which saw its share price double in its first day of trading to close at $44 in January. Chipotle’s shares were trading at $64.16 Thursday afternoon.

“Chipotle was a growth story. Burger King is a much more mature company. It’s a more turnaround story,” he said. “They’re taking what’s a well-known brand and turning it into a good company. All the pieces are already there.”

Miami-based Burger King plans to use the proceeds to repay $350 million in outstanding debt, much of it stemming from a $367 million dividend paid in February to its current owners — private equity firms Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners.

Chidsey said paying down the debt would allow the company extra financial flexibility, making it more attractive to investors.

Last month, he became the company’s 11th CEO since 1989 — after predecessor Greg Brenneman stepped down just 20 months into the job.

Chidsey said he was pleased by the initial price, which the company set at the high end of a previously announced range of $15 to $17.

“To price at the high end of the range when (yesterday) the market was down 200 points with a very oversubscribed book was a testament to the stock,” Chidsey said.

Burger King’s underwriters will have the option to buy up to 3.75 million more shares if demand is high enough, but Burger King would not receive any of those additional proceeds, the company said.