Restaurant Brands will take full control of Carrols Restaurant Group in a deal that values the largest US Burger King franchise at about $1 billion (€919.5 million), accelerating a turnaround for the Canadian firm's franchise model.
The quick-service restaurant chain operator has rolled out a program to move away from larger and toward local franchisees as part of a strategy revamp at its Burger King division in America to draw in a younger crowd.
Carrols operates more than 1,000 Burger King restaurants and 60 Popeyes outlets and the Tim Horton's owner currently controls about 15% of the company.
Image Transformation
"This presents an opportunity for us to really take charge of the Burger King US image transformation and ... proactively drive that shift to a more aligned group of operators," Tom Curtis, president of Burger King US and Canada, said on a conference call.
The company will invest about $500 million (€459.8 million) to modernize 600 restaurants it acquires from Carrols, and more than double the current pace of remodeling the franchisee's outlets.
Expansion
Restaurant Brands executives added that they look at increasing the number of Burger King US franchisees to about 400-500 over the next five years from about 300 currently.
The company will pay $9.55 per share in cash for Carrols shares not already owned, a 13.4% premium to the stock's closing price on January 12. Carrols' shares were trading at $9.48, while Restaurant Brands was down about 1%.
'Earnings Growth'
"Long term, this deal could reposition Burger King US for stable sales and earnings growth and a return to real net unit growth," said Northcoast Research analyst Jim Sanderson.
Restaurant Brands said the transaction is likely to close in the second quarter and expects it to be about flat to its adjusted earnings per share.
