Burger King to buy franchisee Carrols so it can 'rapidly remodel' restaurants

By Tomi Kilgore

Carrols to be acquired for a 13% premium, in a deal valued at $1 billion

Burger King Co., which is owned by Restaurant Brands International Inc., announced Tuesday an agreement to buy its largest U.S. franchisee, Carrols Restaurant Group Inc., in a deal valued at $1 billion.

"This acquisition is an exciting accelerator to our 'Reclaim the Flame' plan that is focused on relentlessly pursuing a better experience for our guests," said Tom Curtis, president of Burger King U.S. and Canada. "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."

Carrols' stock (TAST) leaped 12.7% in premarket trading, putting it on track to open at the highest price seen during regular-session hours since Aug. 1, 2019. Restaurant Brands shares (QSR) dropped 1.1%, after closing Friday just shy of its Jan. 10 record close of $78.63.

Under the terms of the deal, Carrols shareholders will receive $9.55 in cash for each Carrols share they own, which represents a 13.4% premium over Friday's closing price of $8.42.

Carrols operates 1,022 Burger King restaurants in 23 states, making it the largest Burger King franchisee in the U.S.

Burger Kings plans to invest $500 million to "significantly accelerate" Carrols' current rate of remodels to bring the approximately 600 restaurants to a "modern image" over the next five years. The investment will be funded Carrols' operating cash flow.

Restaurant Brands expects the deal, which is expected to close in the second quarter of 2024, to be neutral to adjusted earnings per share.

Carrols' stock has run up 49.8% over the past three months through Friday, while Restaurant Brands' stock has rallied 23.8% and the S&P 500 has gained 9.4%.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

01-16-24 0805ET

Copyright (c) 2024 Dow Jones & Company, Inc.