Burger King filed a revised S-1 today. It gives us another peek into the mechanics of big buyout deals. In particular, we see a re-appearance of the massive "special dividend" and the cancellation fee for the management contract with private equity holders.
Burger King was bought by private equity firms led by Texas Pacific Group and including Bain and Goldman Sachs Capital Partners. They have been drawing down rather significant management fees since.
According to the S-1:
Since 2002, we paid $27 million in quarterly management fees, which were paid as compensation to the sponsors for monitoring our business through board of director participation, executive team recruitment, interim senior management services that were provided from time-to-time and other services consistent with arrangements with private equity funds. Under the management agreement, we also paid the sponsors a separate fee of approximately $22.4 million at the time of the acquisition.
In connection with the closing of this offering, we will pay the one-time sponsor management termination fee of $30 million, which will be split equally among the three sponsors, to terminate all provisions of the management agreement, except for the indemnification provisions which will survive. The sponsor management termination fee resulted from negotiations with the sponsors to terminate the management agreement which obligated us to pay the quarterly management fee. Our board of directors concluded that it was in the best interests of the company to terminate these arrangements with the sponsors and the resulting payments upon becoming a publicly-traded company.
We have reimbursed the sponsors for certain travel-related expenses of their employees in connection with meetings of our board of directors and other meetings related to the management and monitoring of our business by the sponsors. Since our December 13, 2002 acquisition of BKC, we have paid approximately $650,000 in total expense reimbursements to the sponsors.
In addition, we paid on behalf of the sponsors approximately $500,000 in legal fees and expenses to Cleary Gottlieb Steen & Hamilton LLP that were incurred by the sponsors in connection with their management of us and arrangements between us and the sponsors. Cleary Gottlieb Steen & Hamilton LLP is providing legal advice to the underwriters in connection with this offering.
And on the special dividend:
On February 21, 2006, we paid a cash dividend of $367 million, which we refer to as the February 2006 dividend, to holders of record of our common stock on February 9, 2006, primarily the private equity funds controlled by the sponsors which owned approximately 95% of the outstanding shares of our common stock at that date, and members of senior management.
