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Diageo Plans Burger King Auction

Burger King, the number-two hamburger chain, will formally go on the auction block early next month, Reuters has learned.

The auction comes as Burger King's parent company, London-based Diageo plc , looks to begin accelerating long-awaited plans to separate the hamburger franchise and focus on its core drinks business, the report said.

Diageo, which produces brands such as Johnnie Walker whiskey and Guinness beer, said yesterday it would "continue to review all options for the hamburger chain, including selling it or taking it public."

As part of that process, Diageo would begin soliciting bidders in the next couple of weeks to judge interest in buying the company outright. Industry sources and analysts have pegged the franchise's value at anywhere from $2 billion to $3 billion.

Several buyers have already expressed serious interest in discussing a takeover, sources said, although no formal negotiations have taken place. Even with a formal bidding process, Diageo will continue to weigh the benefits of selling Burger King against taking it public, the sources cautioned.

Analysts have speculated that bidders for the burger business would be almost exclusively private equity buyers. Antitrust concerns would most likely prevent other leading public fast-food chains, such as McDonald's Corp., the number-one hamburger chain, or number-three Wendy's International from making bids. Burger King has steadily lost market share to McDonald's and Wendy's over the past three years.

Industry sources told Reuters that Burger King Chairman and CEO John Dasburg is expected to lay out plans for a $2.29-billion management buyout to Diageo's board later this month. One source close to situation said that, despite rumors an offer from Dasburg would be given preferential treatment, all bidders will begin the auction "on a level playing field," the report said.
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