Burger King talks takeover with 3G Capital

As a result of the uninspiring sales and resultant dismal profits, Burger King Holdings Inc (BKC.N) has put itself up for sale.

The second biggest U.S. hamburger chain is purportedly in advanced talks with New York-based 3G Capital.

Sources familiar with the matter, on the condition of anonymity, disclosed that the proposed $2.7 billion deal could be struck as early as Thursday morning.

Shares of Burger King spike
While the proposed buyer may not be a huge player in business circles, 3G Capital is backed by wealthy Brazilian deal makers, including the billionaire Jorge Paulo Lemann.

Shares of Burger King spiked to $18.86 when the news of the proposed sale broke out.

"We've seen quite a bit of private-equity interest in the restaurant space already this year. At this point in Burger King's history, it may be better off out of the public eye to solve some of the big challenges it faces.” -- Analyst Mark Kalinowski of Janney Capital Markets

The spike represents an increase of $2.41 or 15 percent, the biggest gain registered by Burger King since May 2006, when the company went public.

3G Capital’s pursuit of an American behemoth and the willingness to shell out more than a 20 percent premium from Burger King’s closing stock price on Tuesday highlights the deep pockets of the buyer.

If the deal sees the light of the day, 3G Capital would build out the fast-food chain internationally.

3G, by virtue of its investment in Wendy’s, has some experience in fast food industry.

"We've seen quite a bit of private-equity interest in the restaurant space already this year. At this point in Burger King's history, it may be better off out of the public eye to solve some of the big challenges it faces,” said analyst Mark Kalinowski of Janney Capital Markets.

What ails Burger King?
The Miami-based chain has been plagued by the recession in recent years, as more consumers preferred not to eat out and save whatever they possibly could, given the uncertain incomes.

Total sales at Burger King fell 1.4 percent to $2.5 billion during the year ended June 30.

The company is not very optimistic about the future as well, given the high unemployment in the United States and economic weakness in Europe.

The fast-food behemoth has also expressed uncertainty over costs of wheat and beef and has warned that any increase in these inputs could affect its results adversely.

"Any improvement at BKC would need to be topline-driven and would require significant investment," Sara Senatore, an analyst at Sanford C. Bernstein & Co. in New York, said.