The Wall Street Journal reports on Burger King's sad performance (subscription required) in its first quarter as a public company following its LIPO (Leveraged Initial Public Offering to new Going Private Readers). Usually pointed on such subjects, the Journal is, this time, somewhat vague and forgiving of The King's regal lapse. Maybe the Journal figures that the double digit stock price sacking would do the critical journalistic work for them. It better, as the usual prodding over the massive dividends paid immediately prior to the offering is shamefully absent from the article.
Shares of Burger King Holdings Inc. fell 11% in midday trading as the fast-food chain reported a loss and tepid sales growth for its first quarter as a public company.
The results underscore concerns that Burger King's private-equity owners took huge payments while leaving investors with a company that has not yet turned the corner. Burger King spent $30 million on a management termination fee during the fourth quarter that ended June 30 that went to owners Texas Pacific Group, the private-equity arm of Goldman Sachs Group Inc. and Bain Capital.
I'm not sure why the $30 million break-up fee was cited and yet the massive $367 million special dividend and $33 million "make whole" payment (management bonus) prior to the IPO was not. Perhaps the Journal just didn't want to kick investors in LIPOs while they were 11% down. And maybe that's important kindness for them. If we are headed into an economic slowdown, (ahem) well, never fear. Burger King's King will save you with his scintillating strategic acumen:
Burger King Chief Executive John W. Chidsey said Burger King will benefit from a slowdown in spending at sit-down restaurants that's prompting some consumers to trade down to fast-food chains. Burger King said its new value menu is performing above expectations.
Uh huh. And how will we press forward into the new age, according to Chidsey as cited by the Journal?
Burger King intends to promote its breakfast menu, emphasize its Kids' Meals and encourage franchisees to remain open longer at night...
This sounds familiar. Now where have I seen this before...? Oh yes, of course. Way back. It was in their S-1/A.
Currently, 50% of Burger King restaurants are open later than 11:00 p.m., with 7% open 24 hours. Approximately 70-80% of the restaurants of our major competitors are open later than 11:00 p.m., with approximately 42% of McDonald’s restaurants open 24 hours. We have recently implemented a program to encourage franchisees to be open for extended hours, particularly at the drive-thru.
That's what makes management teams great. Adapting to new environments
quickly and decisively. Really, this makes me think there is more to
the former CEO's departure than meets the eye.
In any event, it looks like the private equity folks timed this transaction right down to the quarter. At the risk of saying "I told you so," do consider my musings on the transaction back in May. I had glowing things to say about management, after all, it is hard to sneeze at eight quarters of sales growth when contrasted to the seven previous quarters of dismal failure. But even then, I wondered why the then CEO bailed, seemingly unexpectedly. Still, back then I was already picturing the deal set to Peter Gallagher and Annette Benning's sex scene in American Beauty:
Private Equity Sponsors: "You like getting nailed by The King?"
Public Equity Markets: "Yes! I love it! Oh, yes! Fuck me, your majesty!"
Now I wonder, didn't anyone bother to tell Burger King investors that you can't eat for at least eight hours before LIPO suction surgery?
(Photo: Burger King Crime Scene, September 2004, [daily dose of imagery])