3G to acquire Burger King

The Burger King headquarters building is seen in Miami, Fla.

TEXT OF INTERVIEW

STEVE CHIOTAKIS: Today Burger King agreed to be acquired by the investment firm 3G Capital for a little bit more than $3.5 billion. The fast food giant, which has thousands of stores around the world, has been a public company since 2006. Steve West is a fast food industry analyst and vice president of the equity research firm Stifel Nicolaus. He's with us live from St. Louis. Good morning.

STEVE WEST: Good morning. How's it going?

CHIOTAKIS: I'm doing well. So why was Burger King so pumped about going private in the first place?

WEST: I think you had to take a look at who owned Burger King, really. Their biggest shareholders were another private equity firm, these were the guys that bought Burger King from Diageo in 2002 and then took them public in 2006.

CHIOTAKIS: Diageo was another investment firm right?

WEST: Diageo was a publicly-traded, basically liquor company out of London. So when we look at that -- the private equity firm that currently owns a little over 30 percent of the shares in Burger King have been looking to divest all those shares since 2006. And then when the market collapsed, they weren't able to do that. This allows them to divest all the shares in one big pop and then get out of that investment and then move on to something different.

CHIOTAKIS: Burger King's been struggling lately, right? I mean, they tried to market themselves differently than McDonald's and the like? Maybe targeting a younger audience?

WEST: Yeah, I think as we look at the struggles of Burger King, it's not just a Burger King struggle. It's been a restaurant industry-wide struggle because of the recession we've been going through. And really, you look at McDonald's, Chipotle and Panera -- they're probably the only three restaurants that have really bucked the trend and done really well throughout this recession. And you're right, Burger King has kind of marketed more towards a much edgier type of marketing campaign, focused more on the 18 to 30-year-old single males, whereas McDonald's is much more broad based appealing -- soccer moms, older people, younger people, or what have you.

CHIOTAKIS: We seeing any changes with Burger King with this deal, you think?

WEST: You know, I think what you'll be able to see is coming out of the public eye, they will be able to leverage up the balance sheet a little bit more than what they have now. This will allow them access to more capital, and then they can turn that around and re-invest in the brand with remodeling, upgrading their technology and things like that, which is something McDonald's has been doing all along and it's really a big competitive disadvantage for Burger King not to be able to do that.

CHIOTAKIS: Steve West, vice president of the equity research firm Stifel Nicolaus. Thanks for your time.

WEST: All right, take care.

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