QSR Duo To Become Trio

When announcing Restaurant Brands International (RBI) Inc.’s intention to acquire Popeyes Louisiana Kitchen, Inc., Daniel Schwartz, Chief Executive Officer of RBI, stressed, “As with our two existing brands the key to long-term success at Popeyes will be a focus on driving guest satisfaction and franchisee profitability.”

The agreement calls for RBI to acquire Popeyes for $79 per share in cash or $1.8 billion. Popeyes joins Burger King and Tim Hortons under the RBI banner. Formed just two years ago, the company has more than $24 billion in system sales and more than 20,000 restaurants. Founded in New Orleans in 1972, Popeyes has 45 years of history and culinary tradition and is the franchisor and operator of Popeyes® restaurants. Today, Popeyes has more than 2,600 restaurants in the U.S. and 25 other countries around the world.  

The key to long-term success at Popeyes will be a focus on driving guest satisfaction and franchisee profitability.

In year end 2016, Popeyes generated annual global same-store sales growth of 1.7 percent and its footprint continued to expand with 216 net new global openings: 118 domestic and 98 international. Global same-store sales increased 2.8 percent in the fourth quarter with an increase in domestic same-store sales of 3.0 percent. The fourth quarter compounded two-year global same-store sales growth was 5.7 percent. For the full year, global same-store sales increased 1.7 percent. Annual compounded two-year global same-store sales growth was 7.7 percent.

“Our brands have long and rich heritages and significant global reach,” added Schwartz. “Each brand is uniquely positioned within its different and complementary sub-segment of the quick-service restaurant industry and, following the acquisition of Popeyes, RBI will gain even greater scale with over 23,000 restaurants worldwide.”

Following the closing of the transaction, Popeyes will continue to be managed independently in the U.S., while benefitting from the global scale and resources of RBI. Building on the momentum of recent years, RBI plans to continue developing the brand at an increasing pace in the U.S. and international markets in the years to come.

“We were very impressed by the fundamentals of the Popeyes business whose restaurants have average revenues of $1.4 million in the U.S. driving compelling returns on capital which have supported consistent U.S. unit growth in recent years,” he added. “And internationally, the company has a large and increasing presence with restaurants in 25 countries and growing. The team has done a great job setting the foundation for future growth and we look forward to the next chapter of Popeye’s as part of the RBI family. Popeyes is a powerful brand with a rich Louisiana heritage that resonates with guests around the world. With this transaction, RBI is adding a brand that has a distinctive position within a compelling segment and strong U.S. and international prospects for growth. As Popeyes becomes part of the RBI family we believe we can deliver growth and opportunities for all of our stakeholders including our valued employees and franchisees. We look forward to taking an already very strong brand and accelerating its pace of growth and opening new restaurants in the U.S. and around the world.”

According to RBI, some of the factors fueling the transaction include:

•  Global Leadership in Chicken Segment
• One of the largest players with rapidly-growing market share
• Unique, Highly-Differentiated Brand
•  Internationally-recognized Louisiana heritage since 1972
• Highly-Attractive Unit Economics

• >$1.4mm ARS and strong franchisee EBITDA margins

• Nearly Fully-Franchised Business Model
• ~98 percent franchised, leading to healthy margins and cash flow
• Significant Expansion Opportunity in the U.S.
•  Consistent track record of successful growth across the country
• International Growth Acceleration
• Numerous development agreements signed in last few years

Cheryl Bachelder, Chief Executive Officer of Popeyes, said, “I am proud of the superior results the Popeyes team has delivered in recent years; they have served all stakeholders well. As Popeyes enters its 45^th year, its success reflects the amazing brand entrusted to us by founder Al Copeland, Sr. and the unique high trust partnership that we enjoy with our franchise owners. RBI has observed our success and seen the opportunity for exceptional future unit growth in the U.S. and around the world. The result is a transaction that delivers immediate and certain value to the Popeyes shareholders.”

Under the terms of the transaction, Popeyes shareholders will receive $79 in cash per share at closing. This represents a premium of 27 percent based on Popeyes’ 30-trading day Volume Weighted Average Price as of February 10, the last trading day before media speculation on the potential sale.    

RBI will finance the transaction with cash on hand and a financing commitment from J.P. Morgan and Wells Fargo.

The transaction is subject to customary closing conditions, including receipt of certain regulatory approvals and receipt of a majority of Popeyes shares on a fully diluted basis in a tender offer to Popeyes’ shareholders. Following the successful completion of the tender offer, RBI will acquire all remaining shares not tendered in the tender offer through a second-step merger at the same price. The transaction is expected to close by early April 2017. 

RBI was advised by Paul, Weiss, Rifkind, Wharton and Garrison LLP. Popeyes received financial advice from UBS and Genesis Capital LLC and legal counsel from King & Spalding LLP