RBI Buying Authentically-Positioned Chicken Leader Popeyes


The rumors proved true, Restaurant Brands International (NYSE/TSX: QSR) is set to acquire Popeyes Louisiana Kitchen (NASDAQ: PLKI) in a deal worth $1.8 billion.

The deal represents a major strategic parent company buying into authenticity. Popeyes did a great job of communicating that authentic position when it focused on its Louisiana roots in recent years. The acquisition also gets RBI and parent company 3G Capital exposure to the growing chicken segment. Popeyes announced that it held 26.6% of the quick-serve chicken segment in August.

The deal was funded with $600 million cash on hand from Burger King and Tim Horton’s parent company and a $1.3 billion financing commitment form J.P. Morgan and Wells Fargo. The deal is expected to close in early April.

At $79 per a share, the deal awards Popeyes with a 27% premium on the 30-day stock average.

As of October, Popeyes had just over 2,600 restaurants in the U.S. and abroad including 50 company-owned locations. The company is 98% franchised, holding about 50 company-owned locations around Memphis and New Orleans, where the brand was founded in 1972. According to a presentation by RBI, the brand enjoys a $1.4 million AUV and strong EBITDA.

RBI CEO Daniel Schwartz said the successful Popeyes would continue to be independently manage the U.S. market.

“The Popeyes team has done an excellent job of increasing restaurant sales and franchisee profitability, roughly doubling the restaurant level EBITDAR from 2008 to 2015,” said Schwartz in a call to investors. “This has allowed zees to reinvest in reimaging of their restaurants bringing the U.S. system almost entirely modern imaging at this point; which we believe providers us with a significant competitive advantage.”

Shares of Popeyes surged 19% in early trading, just shy of the $79 mark. Shares of QSR jumped 7.3% to $57.85 in early trading.

See the full release below: 

OAKVILLE, Ontario - Restaurant Brands International Inc. ("RBI") (NYSE/TSX: QSR, TSX: QSP) and Popeyes Louisiana Kitchen, Inc. ("Popeyes") (NASDAQ: PLKI) announced today that the companies have reached an agreement for RBI to acquire Popeyes for $79.00 per share in cash, or $1.8 billion. Restaurant Brands International Inc. (CNW Group/Restaurant Brands International Inc.)

The acquisition of Popeyes will add a successful, highly-regarded brand with strong customer loyalty to RBI, one of the largest global quick service restaurant companies with two of the world's most iconic QSR brands – BURGER KING® and TIM HORTONS®. Founded in New Orleans in 1972, Popeyes has 45 years of history and culinary tradition and is the franchisor and operator of Popeyes® restaurants. Today Popeyes is one of the world's largest quick service restaurant chicken concepts with over 2,600 restaurants in the U.S. and 25 other countries around the world and its global footprint will complement RBI's existing portfolio of over 20,000 restaurants in more than 100 countries and U.S. territories.

Following the closing of the transaction, Popeyes will continue to be managed independently in the U.S., while benefiting from the global scale and resources of RBI. Building on the momentum of recent years, RBI plans to continue developing the brand at an increasing pace in the U.S. and international markets in the years to come.

Daniel Schwartz, Chief Executive Officer of RBI, said, "Popeyes is a powerful brand with a rich Louisiana heritage that resonates with guests around the world. With this transaction, RBI is adding a brand that has a distinctive position within a compelling segment and strong U.S. and international prospects for growth. As Popeyes becomes part of the RBI family we believe we can deliver growth and opportunities for all of our stakeholders including our valued employees and franchisees. We look forward to taking an already very strong brand and accelerating its pace of growth and opening new restaurants in the U.S. and around the world."

Cheryl Bachelder, Chief Executive Officer of Popeyes, said, "I am proud of the superior results the Popeyes team has delivered in recent years; they have served all stakeholders well. As Popeyes enters its 45th year, its success reflects the amazing brand entrusted to us by founder Al Copeland, Sr. and the unique high trust partnership that we enjoy with our franchise owners. RBI has observed our success and seen the opportunity for exceptional future unit growth in the U.S. and around the world. The result is a transaction that delivers immediate and certain value to the Popeyes shareholders."

Structure and Terms

Under the terms of the transaction, Popeyes shareholders will receive $79.00 in cash per share at closing. This represents a premium of 27% based on Popeyes' 30-trading day Volume Weighted Average Price as of February 10, the last trading day before media speculation on the potential sale of Popeyes. RBI will finance the transaction with cash on hand and a financing commitment from J.P. Morgan and Wells Fargo. The transaction is subject to customary closing conditions, including receipt of certain regulatory approvals and receipt of a majority of Popeyes shares on a fully diluted basis in a tender offer to Popeyes' shareholders. Following the successful completion of the tender offer, RBI will acquire all remaining shares not tendered in the tender offer through a second-step merger at the same price. The transaction is expected to close by early April 2017.

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