Diageo sell BurgerKing in whopper of a deal

Fast-food giant Burger King was sold at the second time of asking today after its British owner agreed a cut-price deal.

Drinks giant Diageo secured the €1.47bn sale with a financial consortium after a previous deal fell through.

Diageo has been battling for two years to offload the division and concentrate on its drinks brands, including Guinness and Smirnoff vodka.

It thought a deal worth €2.3bn had been struck in the summer but the buyers rejected terms last month because of a trading downturn.

The Miami-based burger chain has been hit by increasingly tough competition in the sector.

The consortium, led by US private equity group Texas Pacific, has now knocked the price down by a third while Diageo will provide some of the debt financing for the sale of the business.

Diageo chief executive Paul Walsh said he was pleased a deal had been done at a tough time for the fast-food sector.

He added: “We continued to review our options but concluded that this transaction with this buying group was the most certain route to achieving separation.”

Since announcing plans in 2000 to focus on its drink business, Diageo has sold its Pillsbury food arm to General Mills and acquired, jointly with Pernod Ricard, Seagram's spirits and wine business.

Diageo still spent heavily trying to improve the Burger King business and was rewarded with signs of a trading revival in the summer.

But in the face of tough competition from arch-rival McDonald’s, Diageo said two months ago that conditions had again “worsened”.

That announcement led to the consortium, which also includes Bain Capital and Goldman Sachs Capital Partners, reviewing terms as the original deal contained certain performance targets.

Diageo added today that operating profits at the Burger King business in the six months to December 31 were likely to be around 20% lower than the €111m achieved a year earlier.