Capital Markets

A Tale of Two IPOs

Burger King readies to launch a whopper IPO, while MasterCard postpones its supersize offering.
Stephen TaubFebruary 17, 2006

Two recognizable name-brand companies are planning initial public offerings of their stocks. However, at the moment they are moving in two distinctly different directions.

In one case, the parent company of Burger King Corp. is planning a $400 million offering, which would rank the deal as the most lucrative restaurant IPO in history, according to If the offering meets its goal, it would top the $391 million raised by Domino’s Pizza in 2004, says the Website. The world’s second-largest burger chain (behind McDonald’s) is expected to bring its shares to market within six months, and use proceeds from the issue to pay down existing debt.

For years, Burger King was a subsidiary of larger industry behemoths, including Pillsbury, Grand Met Plc, and Diageo Plc. “As a result, Burger King Corporation became a small, non-core subsidiary of a large conglomerate, making it difficult for the brand to prosper,” said company officials in an SEC filing. In 2002, a group of private-equity firms, including Texas Pacific and Bain Capital Partners, bought Burger King from the UK-based Diageo, paying about $1.5 billion for the chain.

In the six months that ended December 31, Burger King reported earnings of $49 million on $1.02 billion in revenue, up slightly from $45 million in earnings on $969 million in revenue in the prior year period.

In another high-profile IPO, officials at MasterCard Inc. said they would push their offering on the New York Stock Exchange to the second quarter because chief executive Bob Selander recently underwent prostate cancer surgery. Originally, MasterCard — the nation’s second-largest credit-card brand — was hoping to launch its IPO during the first quarter.

In a letter to shareholders, Selander noted that he had been advised not to undertake a demanding travel schedule for the next few months, which would rule out anything as rigorous as an IPO road show. “You can’t do a road show without your CEO,” Eric Grover, an analyst with corporate-consultancy firm Intrepid Ventures, told the Associated Press. “There are other people that can certainly tell the story, but this is the guy that’s going to be managing the company. If I’m a perspective investor, I want to hear him telling me why it’s a compelling story.”

According to the AP, the MasterCard IPO was expected to raise about $2.5 billion. When it is completed, it is anticipated to be the largest IPO since August 2004, when Google Inc. went public on Nasdaq.

The offering faces another hurdle: the wire service noted that MasterCard, along with larger rival Visa, is embroiled in a lawsuit related to “interchange fees” that retailers pay to receive payments for credit-card transactions. According to the report, MasterCard plans to reserve $650 million from its IPO proceeds to cover expenses related to that suit.