Burger King Holdings, Inc. (BKC) shares surged 14.8% on high volume Wednesday morning on rumors that the 2nd largest hamburger chain in the world is in talks to be taken private by British equity firm 3G Capital Management LLC. The shares jumped as high as $19.19, the biggest surge in four years since the company’s IPO in May 2006.
Sources involved with the negotiations said the buyout discussions are advanced and a possible deal could be reached within a few days, although there is still a possibility that negotiations could collapse. A buyout of Burger King would mark the second time the company has been taken private in the past decade.
Analysts suggest taking Burger King private would allow the company to focus on some major challenges such as healing strained relations with its franchisees, introducing a new breakfast menu in the U.S. and differentiating itself from McDonalds.
Burger King has been facing serious issues lately, share prices have fallen 13% since the start of 2010, with global sales down -2.3% for the 2010 fiscal year and North American sales declining to a greater extent. Despite recently exceeding expectations with $49 million 4th quarter profits, or 36 cents per share, bottom-line figures were decidedly lower than the previous years’ results. Although the company faces many challenges, attributes such as healthy cash flows and opportunities to grow productivity as it expands abroad are appealing to potential buyers.