Burger King deal gains EU approval

Amid question marks over financing for the $2.26bn transaction, the sale of Burger King has been approved by the European Commission.

The European Commission has approved the sale of Burger King by Diageo, to a consortium of private equity bidders led by Texas Pacific Group, removing one of the obstacles to completion of the troubled purchase.

The consortium, which agreed to pay $2.26bn for the fast food chain in July, comprises Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners. Bain Capital also owns a 93 per cent stake in Domino’s Pizza, which it acquired in 1998.

In a statement, the Commission said: “The transaction will bring into the same group Domino's Pizza and Burger King, but the latter will continue to face competition from a wide range of rival food chains.”

Of greater concern for the acquiring consortium is the seeming lack of interest in financing the leveraged buyout. The consortium had planned to raise around $1.66bn for the debt component of the transaction, of which $500m was to be raised in the high-yield bond market and the remainder from banks.
But adverse market conditions have complicated the process, as has a dip in performance by Burger King. Several reports have suggested that the consortium may seek a renegotiation on price, citing a material adverse change clause in its buyout agreement.

Yesterday, a Diageo spokesperson said the deal was still on track, and that the drinks company was anticipating completion by December.