Burger King's parent company is buying Carrols Restaurant Group, the fast food chain's largest U.S. franchisee, for a whopping $1 billion.
Restaurant Brands International Inc., which owns Burger King, Tim Hortons, Popeyes and Firehouse Subs, will purchase Carrols for $9.55 per share in an all cash transaction, the company announced Tuesday.
Carrols operates 1,022 Burger King restaurants in 23 states, which brought in approximately $1.8 billion of system sales in 2023, as well as 60 Popeyes restaurants in six states, according to Restaurant Brands International.
The move comes as part of Burger King's "Reclaim the Flame" plan, a program to move away from larger and toward local franchisees as part of a strategy to revamp the Burger King brand in America, refurbish restaurant locations and draw in a younger crowd.
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Carrols stock closed at $8.42 per share on Friday, with a market value of $449 million. The stock surged 22.49% on Tuesday, hitting $9.51 at 12:36 p.m. ET.
"Carrols has demonstrated strong and improving restaurant operations over the years," said Tom Curtis, President of Burger King U.S. and Canada. "This acquisition is an exciting accelerator to our ‘Reclaim the Flame’ plan that is focused on relentlessly pursuing a better experience for our guests. We are going to rapidly remodel these restaurants over the next five years or so and put them back into the hands of motivated, local franchisees to create amazing experiences for our guests."
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The company will invest about $500 million to modernize 600 restaurants it acquires from Carrols, and more than double the current pace of remodeling the franchisee's outlets.
Restaurant Brands executives told investors on a conference call they plan to increase the number of Burger King U.S. franchisees to about 400-500 in the next five years from about 300 currently.
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"Today's announcement is a testament to our more than 24,000 Carrols team members who have helped drive the company to record levels of profitability over the past 12 months. These results have allowed us, through this transaction, to deliver immediate and certain value to Carrols shareholders at an attractive premium to the Company's current and historical share prices," said Deborah Derby, President and CEO of Carrols.
Josh Kobza, CEO of Restaurant Brands International, added, "This is a terrific example of our commitment to put our capital to work to accelerate growth and support Tom and his team in their broader efforts to have a more competitive Burger King restaurant base. The strategic merits of this acquisition are very compelling and consistent with our objective to invest our capital in long-term, high-return opportunities."
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Restaurant Brands International said the transaction is expected to be completed in the second quarter of 2024.
Reuters contributed to this report.
