Burger King's Parent Company to Acquire Carrols for $1B
TAST 
QSR 
Restaurant Brands International Inc (NYSE:QSR) is set to acquire all shares of Carrols Restaurant Group Inc (NASDAQ:TAST) for $1.0 billion in an all-cash transaction. The deal will see Restaurant Brands International, the parent company of Burger King, Tim Hortons, Popeyes, and Firehouse Subs, take full control of Carrols Restaurant Group, the largest U.S. Burger King franchisee. This strategic acquisition aims to revamp the Burger King franchise model and enhance the overall guest experience.
The acquisition is part of Burger King’s plan to accelerate sales growth and drive franchisee profitability. It involves the re-franchising of the acquired restaurants, where about $500 million will be invested to remodel approximately 600 restaurants and re-franchise them to new or existing smaller franchise operators. The re-franchising exercise is expected to be completed in five to seven years. Burger King’s “Reclaim the Flame” plan aims to move away from larger franchisees toward local ones to modernize the brand and appeal to a younger crowd.
The transaction is expected to be completed in the second quarter of 2024. Restaurant Brands International held $1.3 billion in cash and equivalents as of September 30, 2023, indicating a strong financial position to facilitate the acquisition.
Strategic Acquisition to Revamp Burger King’s Image
The acquisition will enable Restaurant Brands International to modernize 600 restaurants and increase the number of Burger King U.S. franchisees over the next five years. Burger King plans to invest about $500 million to remodel the acquired restaurants, aiming to reposition Burger King U.S. for stable sales and earnings growth. This strategic move positions QSR for accelerated growth, improved restaurant operations, and a more competitive Burger King restaurant base.
The “Reclaim the Flame” plan is a key driver behind the acquisition, as it involves moving away from larger franchisees toward local ones in order to revamp the brand and appeal to a younger crowd. By investing in new technology, boosting advertising spending, and enhancing the customer experience within stores, the plan aims to boost traffic and reverse years of slumping sales. This presents an opportunity for Restaurant Brands International to take charge of the Burger King U.S. image transformation and proactively drive the shift to a more aligned group of operators.
The acquisition aligns with QSR’s commitment to investing in long-term, high-return opportunities and is expected to have a nearly neutral impact on adjusted earnings per share. Restaurant Brands currently carries a Zacks Rank #2 (Buy), and the acquisition underscores its dedication to enhancing its portfolio and driving sustained growth in the competitive fast-food industry.
Financial and Operational Implications
Restaurant Brands International Inc will acquire Carrols Restaurant Group Inc for $9.55 per share in an all-cash transaction, representing an aggregate total enterprise value of approximately $1.0 billion. This offer represents a 23.1% premium to Carrols’ 30-day volume-weighted average price as of January 12, 2024. Carrols operates 1,022 Burger King restaurants in 23 states and 60 Popeyes restaurants in six states, bringing in approximately $1.8 billion of system sales in 2023.
Burger King plans to invest about $500 million of capital to remodel approximately 600 acquired restaurants and re-franchise them to new or existing smaller franchise operators. The transaction is expected to be completed in the second quarter of 2024. The acquisition is expected to be about flat to Restaurant Brands’ adjusted earnings per share, and it is likely to close in the second quarter.
Positive Market Reaction and Future Prospects
Carrols’ stock surged after the acquisition announcement, indicating positive market sentiment. With the strategic acquisition, Restaurant Brands International Inc. aims to reshape Burger King’s image and drive sales growth. By investing in remodeling and re-franchising, the company is gearing up to attract a younger customer base and increase the number of franchisees, setting the stage for long-term success in the competitive fast-food industry.
This move presents an opportunity for Restaurant Brands International to accelerate growth, enhance restaurant operations, and reposition Burger King U.S. for stable sales and earnings growth. The company’s commitment to investing in long-term, high-return opportunities underscores its dedication to enhancing its portfolio and driving sustained growth in the competitive fast-food industry.