Carrols Restaurant Group acquired by Restaurant Brands

Restaurant Brands International agreed on 16 January 2024 to acquire the shares of Carrols Restaurant Group it did not already hold, at 9.55 dollars per share in cash, implying an enterprise value of $1–10bn and an EV/EBITDA multiple of 5x–12x. The price represented a premium of 23.1% to the thirty-day volume-weighted average and 13.4% to the closing price of 12 January. The acquirer held approximately 15% of the capital beforehand, financed the purchase from cash and committed term debt, and expected completion during the second quarter. Carrols Restaurant Group ranks as the largest Burger King franchise partner in the United States, operating 1,022 restaurants under that brand across 23 states alongside 60 Popeyes establishments in six states, and employing more than 24,000 people. It has held Burger King franchises since 1976 and Popeyes since 2019. Revenue amounted to $1–10bn over the twelve months to September 2023, with an adjusted EBITDA of $100–200M. The acquisition inverts the usual direction of the franchise relationship, a brand owner taking ownership of the operator rather than granting rights to one, and the stated purpose is temporary: the acquirer intends to invest approximately 500 million dollars of the acquired company’s operating cash flow in remodelling around 600 restaurants over five years, then to refranchise the majority to smaller local operators within five to seven years, retaining a couple of hundred establishments for training and product development. That programme forms part of a wider investment in the Burger King estate begun in September 2022 with 400 million dollars directed at remodelling, operations, marketing and digital systems, the brand’s American restaurants having fallen behind competitors in condition and sales per site. Governance reflected the pre-existing shareholding. A special committee of independent directors unconnected with the acquirer conducted the negotiations with its own advisers, the merger agreement provided a thirty-day period during which alternative proposals could be solicited, and completion required the approval of a majority of shares held by unaffiliated holders as well as of the whole. Cambridge Franchise Holdings, holding around 17% of the capital, undertook to vote in favour. J.P. Morgan advised Restaurant Brands International, with Paul, Weiss as legal counsel, while Jefferies advised the special committee of Carrols, with Milbank as counsel.

By taking control of Carrols Restaurant Group, Restaurant Brands continues its expansion strategy. Previously, the group had completed 2 acquisitions, including Fiesta Restaurant in 2023.