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By JOE NOCERA
Earlier this week, a well-known company went public in a complicated transaction that involved a handful of Wall Street sharpies and a mysterious investment vehicle called a SPAC. The company was Burger King.
If you are surprised to learn that the home of the Whopper not to mention the bacon sundae would find itself the subject of complex financial machinations, you shouldnt be. Burger King has long been an enrichment scheme for clever financiers, who have sucked hundreds of millions of dollars out of it over the years. Maybe it will be different this time. Or maybe not. Financial engineering has been part of the Burger King story for so long that its hard to believe there is still anything worth plucking from its carcass. Its been run as a cash cow for Wall Street, said Bob Goldin, an executive vice president of Technomic, a food service consulting firm. Along the wayits had 13 chief executives in 25 years, numerous strategy shifts and marketing campaigns and has been constantly starved for cash. But, hey, the private equity guys got theirs. And isnt that what really matters? Burger King first became financial fodder in 1967 when it was bought by Pillsbury, which didnt have a clue about how to run a restaurant chain. Then in 1988, a British company, Grand Metropolitan, initiated a hostile takeover and won Pillsbury. The new owners vowed to turn Burger King around. It didnt happen. Nine years later, Grand Met merged with Guinness to form Diageo, by which time Burger Kings role was well established. It shipped cash to headquarters, even as it lagged ever further behind McDonalds. Enter ta-da! private equity. In 2002, Goldman Sachs, along with two private equity firms, TGP and ... hmmm ... Bain Capital, teamed up to buy Burger King. This is exactly the kind of situation private equity firms like to trumpet: taking over a downtrodden company and nursing it back to health. And to get them their due, Burger Kings new owners did some good, stabilizing both the company and the franchisees, many of whom were in worse shape than Burger King itself. But the private equity investors also cut themselves an incredibly sweet deal. Their $1.5 billion purchase price included only $210 million of their own money; the rest was borrowed. They immediately began taking out tens of millions of dollars in fees. Four
http://www.nytimes.com/2012/06/23/opinion/nocera-burger-king-the-cash-cow.html?src=me&ref=general
For the sake of all the people whose livelihoods depend on Burger King, lets hope that happens. And if it doesnt? The financiers will still make money. They always do.
http://www.nytimes.com/2012/06/23/opinion/nocera-burger-king-the-cash-cow.html?src=me&ref=general