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A Look At Micro PE Firm 3G Which Hopes To LBO Burger King

Tyler Durden's picture




 

The fund expected to be LBOing $2.4 billion Burger King is heretofore completely unknown PE firm 3G (dyslexic readers note: not the previously rumored 3I). Who is 3G? Apparently it is a fund which according to Thomson One has less than a billion in total assets, the bulk of which, or 83%, is currently held by its CSX investment. This is because fund manager Alex Behring, a Brazilian, sits on the board of the railroad company since 2008, after 3G launched a failed proxy fight for the firm. So does the industrialist whose fund is much smaller than the hoped for acquisition have an expertise in retail? Why yes - according to the fund's latest 13F it has a whopping $56 million invested in Coke, $27 million in Lorillard, and a massive $3 million in Kraft. Burger King employees must be ecstatic, especially since the acquisition will likely be funded almost entirely with debt, meaning that the good ole' LBO model of sucking the equity marrow out of target companies, while paying hundreds of millions in interest expense is back to the forefront. Luckily, courtesy of JPM, the acquisition funding should not be a problem: we are confident the roughly 8x pro forma leveraged balance sheet will end up being rated AAA/Aa1 and pay about 5% interest, with no creditor protections whatsoever. To all those credit investors who wish to collect 2-3 coupon payments before the imminent default, we wish them all the best.

Quick look at 3G:

 

 

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Wed, 09/01/2010 - 11:27 | 557647 Bigger Dickus
Bigger Dickus's picture

Oh boy oh boy, a Brazilian running a fund with debt to the brim wants to buy Burger King with 99.99999999% debt going into a double dip recession? This should be fun to watch.

Wed, 09/01/2010 - 11:33 | 557667 Hephasteus
Hephasteus's picture

Why it's going to be the PLAY book for what global mergers and aquisitions look like this business cycle.

Wed, 09/01/2010 - 11:42 | 557706 tmosley
tmosley's picture

Holders of cash will be able to get a good deal in a year or two, assuming they don't liquidate in the meantime.

Wed, 09/01/2010 - 20:00 | 558616 camoes
camoes's picture

Wow Dickus, you're so smart and these brazilians must be really stupid and don't know anything about investing, right?

Beer, chicken and now burgers...

- A private equity of Brazilians already owns Anheuser-Busch/Inbev

- JBS (Brazilian meat processor - larger than Tyson) bought Pilgrim's Pride

Double, triple or quad dip, people still need to eat and drink (nothing like an ice cold Bud with a whopper)

+ treasury money-printing machine  + unemployed on food stamps + Chinese affording more chicken and beef = rampant food inflation...

Oh boy, oh boy, these brazilians must be really dumb...

 

 

Wed, 09/01/2010 - 20:10 | 558629 camoes
camoes's picture

oh, wait - it's the same PE that owns Anheuser-Busch/Inbev, CSX and America Latina Logistica

BUD - 86 billions + CSX 19 billions + a couple of other billions = >100 billion worth

Yep, they are a very small and unknown PE firm of clueless Brazilians...

Thu, 09/02/2010 - 02:42 | 559125 Bigger Dickus
Bigger Dickus's picture

Camoes, you are either Portuguese or Brazilian. That means that you are either a short man who sucks at soccer or a hot girl with a firm ass that you can't take home to mom.

 

 

By the way, Inbev is saddled with debt. Any black swan that sends interest rates through the roof will wipe them out.

Thu, 09/02/2010 - 23:32 | 561195 Borat
Borat's picture

White trash...

Wed, 09/01/2010 - 11:29 | 557658 I am a Man I am...
I am a Man I am Forty's picture

Not going to happen.

Wed, 09/01/2010 - 11:37 | 557676 Nihilarian
Nihilarian's picture

I guess they took the slogan 'Have it Your Way" a bit too literally. Or is it, "Wake Up With The King"?

Wed, 09/01/2010 - 12:15 | 557765 cyclemadman
cyclemadman's picture

Just watch out for the morning tongue.

Wed, 09/01/2010 - 14:46 | 558091 Oracle of Kypseli
Oracle of Kypseli's picture

Or.. Wear metal underwear before you go to bed with the King.

Wed, 09/01/2010 - 11:34 | 557677 TooBearish
TooBearish's picture

KKR IPO back on?

Wed, 09/01/2010 - 11:37 | 557685 traderjoe
traderjoe's picture

Anything that gets the current P/E investors out of their flailing investment. Probably tired of arguing with franchisees about $.99 2x cheeseburgers. And a stock that was trading at its 52-week lows before the rumor started. 

That's the racket, get a 5% stake in a stock, announce an interest in a review of strategic options, even in a flailing industry, and watch the stock pop 15%. See Barnes and Noble, BJ's Wholesale, etc. 

Wed, 09/01/2010 - 11:37 | 557687 Internet Tough Guy
Internet Tough Guy's picture

You know what they call a Quarter Pounder with Cheese in Paris? They call it a Royale with cheese.

Wed, 09/01/2010 - 11:51 | 557711 Agent P
Agent P's picture

You know what they call a Quarter Pounder with Cheese in Paris?

They don't call it a Quarter Pounder with Cheese?

No, man, they got the metric system, they don't know what the fuck a Quarter Pounder is.

What do they call it?

They call it a Royal with Cheese.

Royal with Cheese.

That's right.

What do they call a Big Mac?

Big Mac's a Big Mac, but they call it Le Big Mac.

Le Big Mac. What do they call a Whopper?

I don't know. I didn't go into Burger King.

 

Wed, 09/01/2010 - 12:28 | 557710 HelluvaEngineer
HelluvaEngineer's picture

I thought everyone wanted 4G these days?

http://www.youtube.com/watch?v=FL7yD-0pqZg

Wed, 09/01/2010 - 12:04 | 557723 AccreditedEYE
AccreditedEYE's picture

What a joke. I remember when The Squid was paying itself massive dividends on this pig, right up to the IPO. (Funny how we never see those "King" commercials anymore.) Now, they want to find a greater fool to have a complete exit. Buyer beware!

http://www.youtube.com/watch?v=Qcgy-Pht9Ls

Wed, 09/01/2010 - 12:18 | 557775 Spalding_Smailes
Spalding_Smailes's picture

And the french fries ...........  fucking brutal.

Wed, 09/01/2010 - 12:05 | 557739 sheeple
sheeple's picture

exit ebitda mult = 100X

goodwill = "blank" [how can anyone put a price on the whopper brand]!!!

 

levered assumptions = 50 across teh board [yeahhh! game is back in town!!!]

coverage = who cares, as long as its Aaa

Wed, 09/01/2010 - 12:08 | 557746 Don.Corleone
Don.Corleone's picture

I really would not underestimate de power of 3G, The guy behind all this is the same guy that bought Inbev and then Anheuser-Busch . 1bi is a peanut money for them

Wed, 09/01/2010 - 12:24 | 557792 NotApplicable
NotApplicable's picture

I like explaining to Anheuser-Busch drinkers how banksters stole their beer.

And how they're using the same method (IOU printing press) to buy up everything on the planet without having to give anything real in return for it.

Then I give them more beer while it all soaks in.

Wed, 09/01/2010 - 12:18 | 557776 NotApplicable
NotApplicable's picture

But... JPM is lending again, so we're all saved... right?

Wed, 09/01/2010 - 12:21 | 557785 Monkey Craig
Monkey Craig's picture

Credit protections are out the door. I saw two term sheets last week with PIK interest options....all high yield borrowers with leverage >3x.

 

 

Wed, 09/01/2010 - 12:48 | 557850 AccreditedEYE
AccreditedEYE's picture

Wow... just.. wow.

Wed, 09/01/2010 - 12:27 | 557799 BearOfNH
BearOfNH's picture

Is this a byproduct of the bond market bubble? All that money rushing into fixed income funds has asset managers reaching for yield, demanding more bonds and higher yields. Somebody is bound to help meet the demand.

Rather like the Japanese buying up California and Manhattan a few decades ago. That worked out real well...

Wed, 09/01/2010 - 12:41 | 557834 hedgeless_horseman
hedgeless_horseman's picture

Would you like us to Super Size your LBO firm?

No, thanks, I can only afford the Real Menu.

Wed, 09/01/2010 - 12:44 | 557840 Young
Young's picture

Haha, I can't help myself (schadenfreude): These guys will take it so hard up the ass even if the succeed in the buyout.

Wed, 09/01/2010 - 12:51 | 557859 Rusty Shorts
Rusty Shorts's picture

"PE firm 3G (dyslexic readers note: not the previously rumored 3I)."

 

Third eye ??

Wed, 09/01/2010 - 13:39 | 557934 williambanzai7
williambanzai7's picture

Burger King is a perpetual has been. Anyone notice that Candover is shutting down. Great time for another drunken PE binge! http://www.ft.com/cms/s/0/b9d14dfe-b4c9-11df-b0a6-00144feabdc0.html

This is called schmucks who have to do crappy deals in order to avoid moving back in with mom and dad. Why not just move back in yo yos !

Wed, 09/01/2010 - 14:02 | 557995 Astute Investor
Astute Investor's picture

I'm sort of ambivalent when it comes to Burger King.  I remember when I was in junior high and the local McDonald's burned down.  My science teacher was a member of the volunteer fire department.  He was at the fire the previous night and told us he saw the manager of the local Burger King across the street holding a sign that said "Have It Your Way"......

Wed, 09/01/2010 - 15:35 | 558236 dantes1807
dantes1807's picture

The buy/sell of Burger King is getting silly. This company is bought and sold on a perpetual basis. First it was a US based company, than it was bought out by a British company. Next it was bought by private equity firms such as TPG. Now private equity is cashing out again. And with all of this, these guys still can't get people through the drive thru line like they do at MCDonalds.

Wed, 09/01/2010 - 15:55 | 558303 Grand Supercycle
Grand Supercycle's picture

Updated S&P500 charts:

http://stockmarket618.wordpress.com

Wed, 09/01/2010 - 17:24 | 558435 cowdiddly
cowdiddly's picture

This is straight out of the Worldcom buying Sprint playbook where a little know telecom from Alabama buys a communications company 10 times larger than itself. The CEO Bernie Ebbers went to prison after a long awaited trial. After the investigation the backing came from none other than Citibank,an if memory serves Sandy Weill's desk at which point further investigation was suddenly stopped. I do wish these criminals would somehow manage some fresh ideas.  

Wed, 09/01/2010 - 20:36 | 558660 knukles
knukles's picture

Like the Good Old Days!

Like when my mommy used to send me and my seventeen brothers (now all deceased, bless their pointed little heads) out on the railroad tracks to scavenge coal for the stove and furnace. 

Ebitda, Proforma Coverage, Tranches, Founder's Stock, Compensation Guidelines, Senior Secured Amortization Schedules, Waterfalls of Principal and Interest Cash Flows.  These are a few of my favorite things. 

And all the while, looking to LBO in a business already beset with razor thin margins..... 

But WTF, can always thin the staff and cut the wages, no? 

Wed, 09/01/2010 - 21:35 | 558732 prophet
prophet's picture

Although traditionally reserved for the first posted reply and now much maligned I submit;

Have it your way, Bitchez!

Thu, 11/04/2010 - 21:10 | 701620 rocky89
rocky89's picture

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