The parent company of Tim Hortons and Burger King says it will pay US$1.8 billion cash to buy the Popeyes chain of chicken restaurants in a so-called friendly deal. So with shares now trading just pennies below the agreed acquisition price - and unless holding until closer to the acquisition's close would result in more favorable long-term capital gains tax treatment - I think Popeyes shareholders would be wise to take their profits and put them to work elsewhere. That's a premium of 27% over Popeyes' unaffected 30-trading day volume weighted average price as of February 10, 2017, the last day before media reports surfaced regarding a potential deal.
Popeyes now owns over 2,600 locations, and around double of them are franchises. The Atlanta-based Popeyes, on the other hand, has been growing rapidly for many years. The brand was founded 45 years ago in New Orleans suburb, named as Southern-fried "Chicken on the Run" restaurant.
They drove EBITDA up 35 per cent within the first year of the Heinz-Kraft merger, and cut capex at Tim Hortons by more than 85 per cent since 2013. After this acquisition, Burger King is likely to push their biscuits and fried chicken even more throughout the world.
Popeyes will continue to be independently managed inside the USA, but the company is looking to expand their presence internationally.
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The move means that RBI grows by just a bit more, though it is still well behind the 40,000 worldwide stores maintained by Yum Brands (Taco Bell, Pizza Hut, etc.). KFC alone operates from more than 18,000 locations. "The key to long-term success at Popeyes will be a focus on guest satisfaction and franchise profitability", he added.
On Tuesday, the companies said that after the deal is complete, Popeyes will continue to be managed independently, but it will get to enjoy the "global scale and resources" that Restaurant Brands brings to the table.
What Will Be the Fate of Popeyes Franchisees?No further statement was issued by Restaurant Brands International (TSE:QSR).
The average Popeyes location has $1.4 million in annual revenue, Schwartz said.