beyondbrics

By Virginia Garcia-Martinez of mergermarket

In a country that produces more beef exports than anywhere else in the world, it’s little surprise that hamburgers are big business.

Now three of Brazil’s best-known businessmen are betting on Burger King’s potential. Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira are behind US private equity firm 3G Capital, which has a record of long-term investments in global consumer brands and has now had a $3.25bn bid for Burger King accepted.

So can Burger King now look to boom in the continent of its backers? Nearly one in ten Burger King outlets are in Latin America – but the company faces strong competition from traditional rival McDonald’s, and from local brands.

3G’s deal at $24 per Burger King share values the fast-food chain’s total equity at $4bn. That’s almost 18 times the company’s expected 2011 earnings, suggesting 3G is confident of Burger King’s growth outlook. John Chidsey, chairman and CEO of Burger King, has said the deal will help the brand expand rapidly abroad.

And Latin America is an appetising market. McDonald’s saw its sales there hit $3.6bn in 2009, more than the chain had anticipated. It’s also increased its 2007-2010 Latin American investment plan from $350m to $450m, according to Woods Staton, chief executive officer of Arcos Dorados, which owns around 1,800 McDonald’s restaurants in the region.

Burger King – with 1,138 outlets – may still have fewer restaurants than McDonald’s in Latin America. However, proportionally the region is more significant to the company – representing 9 per cent of its total outlets, compared to 6 per cent of McDonald’s.

The question is how much room for growth there is in Latin America. Burger King faces competition not just from McDonald’s, but also from Hamburguesas El Corral, which has around 150 outlets in its native Colombia, and is also present in Panama, Chile and Ecuador.

Burger King has changed hands numerous times in the last few years – between a number of British and American owners who’ve enjoyed mixed success in improving the company’s performance.

But perhaps now its Brazilian bosses can beef up the chain as it jostles for South America’s hamburger-lovers.

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