Whopper of a Deal

Burger King, owned by Restaurant Brands International Inc., revealed a strategic move on Tuesday with the acquisition of its largest U.S. franchisee, Carrols Restaurant Group Inc., in a noteworthy deal valued at $1 billion.

Accelerating the 'Reclaim the Flame' Plan

Tom Curtis, President of Burger King U.S. and Canada, expressed enthusiasm about the acquisition, stating, "This move is a pivotal accelerator to our 'Reclaim the Flame' plan, dedicated to relentlessly enhancing the guest experience. Over the next five years, we will swiftly remodel these restaurants, placing them in the hands of motivated local franchisees to create exceptional experiences for our guests."

Financial Impact and Stock Movements

In premarket trading, Carrols' stock surged by 12.7%, poised to open at its highest level since August 1, 2019. In contrast, Restaurant Brands shares experienced a 1.1% dip, following a close just shy of its January 10 record.

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

Scope of Operations

Carrols currently operates 1,022 Burger King restaurants across 23 states, solidifying its position as the largest Burger King franchisee in the U.S.

Investment in Remodeling

Burger King plans to invest $500 million to "significantly accelerate" Carrols' ongoing restaurant remodels, aiming to bring approximately 600 locations to a "modern image" within the next five years. This substantial investment will be funded by Carrols' operating cash flow.

Anticipated Closing and Financial Outlook

The deal, projected to close in the second quarter of 2024, is expected to be neutral to adjusted earnings per share for Restaurant Brands. Despite Carrols' stock surging 49.8% in the past three months, Restaurant Brands and the S&P 500 have seen respective increases of 23.8% and 9.4%.