has disclosed a large stake in Burger King Corp. (
), the world's second-largest fast food chain, according to
GuruFocus Real Time Picks
. Ackman, founder of hedge fund Pershing Square and activist
investor, owns 41,922,908 shares, or 12% of the company, which
just returned to trading on the New York Stock Exchange on June
Burger King (
) ceased trading publicly in October 2010 after 3G Capital, a
private equity firm, took it private for $24 per share, or
approximately $4 billion, and imposed a management shakeup.
Ackman paid $1.4 billion to partner with Burger King Holdings.
Though the company has had 13 CEOs in the last 25 years, the fast
food industry is growing at a 4.7% CAGR over the past 20 years,
taking share away from full-service restaurants, as Ackman
highlights in his 53-page presentation on the company, "
Justice Is a Dish Best Served Flame Broiled
More recently, Ackman commented on the merger in
Pershing Square's first-quarter letter
One of the most lucrative aspects of the company appealing to
investors is its potential for global expansion. In June, it
announced the launch of its "accelerated growth in China." This
means the opening of 1,000 restaurants in China in the next five
to seven years, under a new joint venture with a Burger King
franchisee and a global private equity firm.
Global expansion will continue through another joint venture to
open several hundred new restaurants in Russia in the next
several years and several hundred in Brazil.
Since 2006, Burger King's revenue has increased from $2.1 billion
in 2006 to $2.5 billion in 2010, after a slight decline in 2009.
Cash flow was negative in 2006, increasing each year to $182
million in 2010.
In the first quarter, an expanded menu, global expansion and a
national advertising campaign helped net income to improve to $25
million after a $5.9 million loss for the prior-year period, with
improved results in all of its operating segments.
Ackman believes that 13 to 16 times EBITDA Capex is a reasonable
valuation for the company. As of April, he believed the company
has the potential to trade between $26 and $41 per share by 2016,
depending on how its global expansion and domestic turnaround
goes. The stock rose 2.26% since it began trading and opened for
$15.99 per share on Monday.
GuruFocus Real Time Picks alerts you for the stock purchases and
sales that Gurus have made within the last two days. Follow your
favorite Gurus closely with GuruFocus' Premium Membership! If you
are not a Premium Member, we invite you for a 7-Day Free
Trial.About GuruFocus: GuruFocus.com tracks the stocks picks and
portfolio holdings of the world's best investors. This value
investing site offers stock screeners and valuation tools. And
publishes daily articles tracking the latest moves of the world's
best investors. GuruFocus also provides promising stock ideas in
3 monthly newsletters sent to