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Burger King owner to buy Popeyes fried chicken for $1.8B

By Nathan Bomey , USA TODAY

The company that owns Burger King added to its fast-food empire with a deal to acquire fried chicken chain Popeyes for $1.8 billion.

Restaurant Brands International, which owns Burger King and coffee-shop chain Tim Hortons, said Tuesday that it had agreed to purchase the rapidly expanding company formally known as Popeyes Louisiana Kitchen for $79 per share. The deal reflects a 27% premium on the 30-day average of the company’s share price.

Popeyes has more than 2,600 locations, about double what it had in 2008. Some 97% are owned by franchisees.

Restaurant Brands said it would seek to “continue developing the brand at an increasing pace” in the U.S. and foreign markets.

Now based in Atlanta, the 45-year-old Popeyes was founded by entrepreneur Al Copeland in New Orleans. The company is known for its Southern-inspired menu, featuring fried chicken and seafood. But the acquisition comes amid slowing sales growth for Popeyes after several years of expansion.

Sales at Popeyes stores open at least a year rose 1.7% for the fiscal year ended Dec. 25, according to an estimate released in January. That came after same-store sales growth of 5.9% in 2015.

“The key to long-term success at Popeyes will be a focus on guest satisfaction and franchise profitability,” Restaurant Brands CEO Daniel Schwartz said in a conference call. “The team has done a great job setting the foundation for future growth.”

The deal marks the latest in a series of moves that bear the hallmarks of Brazilian investment firm 3G Capital’s approach to financial restructuring.

Known for targeting acquisitions for revenue growth and cost cutting, 3G Capital, which engineered the Burger King acquisition of Tim Hortons, controls about 42.6% of the voting shares in Restaurant Brands, according to a public filing. The investment firm, paired with investor Warren Buffett’s Berkshire Hathaway, previously helped engineer the merger of Kraft and Heinz.

It was not immediately clear whether Restaurant Brands plans to close any locations, cut any jobs, combine any corporate operations or merge purchasing operations. The company did not respond to a request seeking comment and an interview.

But the Popeyes brand “will be managed independently,” Schwartz said on a conference call without taking questions.

Restaurant Brands has placed Burger King on a growth track by reemphasizing value in its product lineup, UBS analyst Dennis Geiger said Feb. 13 in a research note.

The average Popeyes location has $1.4 million in annual revenue, Schwartz said. Franchisee profitability averaged $340,000 per location in 2015, according to a public filing, up from $188,000 in 2008.

The company opened 216 net new stores in 2016 after opening 219 in 2015.

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