Burger King Holdings Inc. LBO Analysis
Circularity Valuation date Acquisition share price Exit EV / EBITDA multiple Exit year
6/30/2010 $24.00 9.4 5.0
Model based on 3G Capital's September 2, 2010 tender offer for all outstanding shares of Burger King Ho Model assumes BKC pays a special dividend before the deal closes and 3G contributes 161 million in cas Specific financing terms were unknown as of the date of this analysis.
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g shares of Burger King Holdings, Inc ("BKC"). ntributes 161 million in cash for operations.
All numbers in $mm except per share data
Sources Equity financing Term loan facility Revolving credit facility Senior unsecured notes Existing capital leases Total sources Additional cash for operations
1,500.0 1,750.0 150.0 900.0 65.3 4,365.3 161.4
Deal terms Advisory fee Pay-out cash prior to closing LIBOR floor Term loan interest spread Revolver interest spread Revolver commitment fee Senior notes interest
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1% 1 1.75% 4.75% 4.75% 1% 8%
Uses
Balance sheet reconciliation Pre LBO
BK offer price Basic shares Diluted shares Acquired equity value Net debt Enterprise value Advisory fees Total uses Dilution Options outstanding Weighted avg. exercise price RSUs, deferred shares, PBRS awards Weighted avg. exercise price Dilution
$24.00 135.9 139.3 3,344.1 826.3 4,170.4 33.4 4,203.9
6.4 17.2 1.6 3.456
Deal metrics Transaction value % debt % equity EV / LTM EBITDA Price / earnings Debt / EBITDA
4,170.4 1 0 9.4 8.0 6.4
Assets excl. cash Cash Goodwill Total assets Debt Leases Other liabilties Equity Total liabilties + SE
2,528.6 31.0 2559.6 761.0 65.3 792.5 940.8 2,559.6
Post LBO Assets excl. cash Cash Goodwill Total assets
2,559.6 161.4 (31.0) 2,690
Debt Leases Other liabilities Equity
2,800.0 65.3 792.5 1,500.0
Total liabilties + SE New goodwill
5,157.8 2,467.8
All numbers in $mm except per share data
Return analysis 2008
2009
Sponsor investment Dividends Exit enterprise value (-) Net debt at exit Total Sponsor cash flow
IRR
For fiscal year ending June 30, 2010 2011 2012 2013 (1,500.0)
(1,500.0)
19.8%
Return sensitivity to exit multiple and Revolver / Term loan cost of debt 19.8% 7.0 8.0 9.0 10.0 11.0
2.00% 9.41% 14.25% 18.38% 22.01% 25.25%
2.50% 9.41% 14.25% 18.38% 22.01% 25.25%
3.00% 9.41% 14.25% 18.38% 22.01% 25.25%
3.50% 9.41% 14.25% 18.38% 22.01% 25.25%
4.00% 9.41% 14.25% 18.38% 22.01% 25.25%
4.50% 9.41% 14.25% 18.38% 22.01% 25.25%
6.50% 12.28% 15.05% 17.57% 19.89% 22.05% 24.06% 25.96%
7.00% 12.18% 14.95% 17.48% 19.81% 21.98% 24.00% 25.89%
Return sensitivty to capex requirements and cost cutting 19.8% -3.00% (0.0) (0.0) 0.00% 1.00% 2.00% 3.00%
5% 12.68% 15.41% 17.91% 20.21% 22.34% 24.34% 26.21%
5.00% 12.58% 15.32% 17.82% 20.13% 22.27% 24.27% 26.15%
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5.50% 12.48% 15.23% 17.74% 20.05% 22.20% 24.20% 26.08%
6.00% 12.38% 15.14% 17.65% 19.97% 22.12% 24.13% 26.02%
e 30, 2014
2015
5,329.3 (1,625.5) 3,703.8
5.00% 9.41% 14.25% 18.38% 22.01% 25.25%
5.50% 9.41% 14.25% 18.38% 22.01% 25.25%
7.50% 12.07% 14.86% 17.40% 19.74% 21.90% 23.93% 25.83%
8.00% 11.97% 14.77% 17.31% 19.66% 21.83% 23.86% 25.76%
Exit multiple Term loan spread
9.4 4.75%
SG&A cost cutting in 2011 Capex % of sales
0.00% 7.00%
Operating and debt paydow
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and debt paydown model
All numbers in $mm except per share data
Inputs 2009
For fiscal year ending June 30, 2010 2011
0 0 113.5
() 0 113.7
0 0 113.7
0 0 0
0 0 0
0 0 0
0 0 24.07%
0 1 -0.6
0 1 1.9
0 1 -0.7
0% 0 1 0
0 5
0 8.8
0 8.7 0.10
7% 8.9 10%
0.1 0.1 0.0 0.2 98.9 0.1 0.0 0.1 0.1 0.0
0.1 0.1 0.0 0.3 104.2 0.1 0.0 0.1 0.1 0.0
5.5% 5.5% 1.0% 25.0% 104.2 7.0% 2.8% 8.0% 13.8% 2.7% 0.0 0.0
0.3 0.4
0.3 0.4
35.50% 0.4
2008 Revenue assumptions Company restaurant growth Franchise growth Property ($ amount) COGS assumptions Food, paper, and product costs % sales Payroll and employee benefits % sales Occupancy and other costs % sales Other income statement assumptions SG&A cost cutting as a % of sales SG&A as a % of sales Property expenses % of property revenue Other operating expenses (income) Fixed asset assumptions Capex % of sales Intangible asset amortization Depreciation % of beg. PP&E
Balance sheet assumptions Receivables % of sales Prepaids and other current assets % of COGS Deferred income taxes % of sales Investment in franchisee property % of franchisee revenue Other assets Accounts payable % of COGS Accrued advertising % of sales Other accrued liabilities % of sales Other liabilties % of sales Deferred income taxes % of sales Share issues / (repurchases) Dividends Tax assumptions Effective tax rate Marginal tax rate Debt assumptions Cash floor Cash sweep LIBOR
0.4 0.4
50 100%
Credit facility interest rate Credit facility commitment fee Term loan interst rate Senior notes interest rate Capital lease interest rate Principal repayments Interest on cash
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0
0
6.50% 1.00% 6.50% 8% 0 0 1%
scal year ending June 30, 2012
2013
2014
2015
0 0 113.7
0 0 113.7
0 0 113.7
0 0 113.7
0 29.92% 24.07%
0 29.92% 24.07%
0 29.92% 24.07%
0 29.92% 24.07%
1% 0 1 0
0% 0 1 0
0% 0 1 0
0% 0 1 0
7% 8.8 10%
7% 8.8 10%
7% 8.6 10%
7% 8.2 10%
5.5% 5.5% 1.0% 25.0% 104.2 7.0% 2.8% 8.0% 13.8% 2.7% 0.0 0.0
5.5% 5.5% 1.0% 25.0% 104.2 7.0% 2.8% 8.0% 13.8% 2.7% 0.0 0.0
5.5% 5.5% 1.0% 25.0% 104.2 7.0% 2.8% 8.0% 13.8% 2.7% 0.0 0.0
5.5% 5.5% 1.0% 25.0% 104.2 7.0% 2.8% 8.0% 13.8% 2.7% 0.0 0.0
35.50% 0.4
35.50% 0.4
35.50% 0.4
35.50% 0.4
50 100%
50 100%
50 100%
50 100%
Growth assumption
1 Conservative
Operating leverage benefit
2 Moderate Restaurant costs as a %
6.50% 1.00% 6.50% 8% 0 0 1%
6.50% 1.00% 6.50% 8% 15.47% 0 1%
6.50% 1.00% 6.50% 8% 15.47% 0 1%
6.50% 1.00% 6.50% 8% 15.47% 0 1%
Conservative
Restaurant costs as a % of restaurant sales changes by 3%
All numbers in $mm except per share data
Income statement For fiscal year ending June 30, 2010 2011
2008
2009
2,454.7 1,538.0 916.7 501.0 62.1 (0.6) 354.2
2,537.4 1,643.7 893.7 494.3 58.1 1.9 339.4
2,502.2 1,614.8 887.4 495.8 59.4 (0.7) 332.9
2,554.6 1,598.9 955.7 506.2 58.6
Depreciation & amortization EBITDA
95.6 449.8
98.1 437.5
111.7 444.6
110.3 501.3
Interest expense, net Profit before taxes
61.2 293.0
54.6 284.8
48.6 284.3
391.0
Tax expense Net Income
103.4 189.6
84.7 200.1
97.5 186.8
138.8 252.2
34.2
34.1
34.2
0
135.1 137.2 $1.40 0.25 0.25
134.8 136.8 $1.48 0.25 0.25
135.4 137.6 $1.38 0.25 0.25
135.4 137.6 $1.86 1.83
Revenue Restaurant expenses Gross margin (1) SGA Property expenses Other operating expenses (income) EBIT
Dividends WASO - basic WASO - diluted EPS - basic EPS - diluted Dividends per share
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391.0
iscal year ending June 30, 2012 2013
2014
2015
2,608.3 1,639.2 969.1 490.7 58.6
2,663.3 1,680.5 982.8 501.1 58.6
2,719.5 1,722.9 996.7 511.7 58.6
2,777.1 1,766.3 1,010.8 522.5 58.6
419.8
423.1
426.4
429.8
118.0 537.8
125.3 548.4
132.1 558.5
138.4 568.1
419.8
423.1
426.4
429.8
149.0 270.8
150.2 272.9
151.4 275.1
152.6 277.2
0
0
0
0
135.4 137.6 $2.00 1.97
135.4 137.6 $2.02 1.98
135.4 137.6 $2.03 2.00
135.4 137.6 $2.05 2.01
All numbers in $mm except per share data
Balance sheet 2008 Cash and cash equivalents Receivables Prepaids and other current assets Deferred income taxes Total current assets PP&E, net Intangible assets, net Goodwill Investment in property leased to franchisees Other assets Total assets Accounts payable Accrued advertising Other accrued liabilities Current portion of LT debt and leases Total current liabilities LT debt Capital leases Other liabilties Deferred income taxes Total liabilities Common stock APIC, net Retained earnings AOCI Total SE Total SE + liabiltiies Balance check
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2009
For fiscal year ending June 30, 2010 2011
121.7 130.0 86.4 32.5 370.6
0.0 142.9 88.4 15.1 246.4
50.0 137.6 88.8 25.0 301.5
1013.2 1062.7 26.4 135.3 98.9 2707.1
1014.1 1025.4 31.0 138.5 104.2 2559.6
1091.5 1016.5 2467.8 138.8 104.2 5120.3
127.0 67.8 220.0 67.5 482.3
106.9 71.9 200.9 93.3 473.0
113.0 70.1 200.2 0.0 383.3
755.6 65.8 354.5 74.1 1732.3
667.7 65.3 344.6 68.2 1618.8
2506.6 65.3 345.3 67.6 3368.1
1.4 577.5 455.4 -59.5 974.8
1.4 580.3 420.4 -61.3 940.8
1752.2 0.0 1752.2
2707.1
2559.6
5120.3
0.00
0.00
0.00
scal year ending June 30, 2012 2013
2014
2015
50.0 140.5 87.9 25.5 304.0
50.0 143.5 90.2 26.1 309.7
50.0 146.5 92.4 26.6 315.5
50.0 149.6 94.8 27.2 321.5
1164.9 1007.7 2467.8 140.4 104.2 5189.0
1234.9 998.9 2467.8 141.9 104.2 5257.4
1301.8 990.3 2467.8 143.5 104.2 5323.1
1366.0 982.1 2467.8 145.1 104.2 5386.7
111.9 71.5 204.4 0.0 387.8
114.7 73.0 208.7 0.0 396.4
117.6 74.6 213.1 0.0 405.3
120.6 76.1 217.6 0.0 414.3
2291.4 65.3 352.5 69.0 3166.0
2069.4 65.3 359.9 70.4 2961.5
1842.1 65.3 367.5 71.9 2752.1
1610.2 65.3 375.3 73.4 2538.5
-
-
-
-
2023.0 0.0 2023.0
2295.9 0.0 2295.9
2570.9 0.0 2570.9
2848.1 0.0 2848.1
5189.0
5257.4
5323.1
5386.7
0.00
0.00
0.00
0.00
All numbers in $mm except per share data
Cash flow statement 2008
2009
For fiscal year ending June 30, 2010 2011
Cash flow from operating activities Net income Depreciation and amortization Change in receivables Change in prepaids and other current assets Change in deferred income taxes Change in other assets Change in accounts payable Change in accrued advertising Change in other accrued liabilities Change in other liabilties Change in deferred income taxes Operating cash flow
252.2 110.3 5.3 (0.4) (9.9) 6.1 (1.8) (0.7) 0.7 (0.6) 361.1
Cash flow from investing activities Capex Change in investment in property leased to franchisees Investing cash flow
(178.8) (0.3) (179.2)
Cash flow from financing activities Dividends Share issues / (repurchases) Cash flow available for debt repayment
181.9
Change in LT debt Change in capital leases Financing cash flow
(293.4)
Net change in cash
(111.4)
Cash balance
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(293.4)
161.4
50.0
iscal year ending June 30, 2012 2013
2014
2015
270.8 118.0 (2.9) 0.9 (0.5)
272.9 125.3 (3.0) (2.2) (0.5)
275.1 132.1 (3.0) (2.3) (0.5)
277.2 138.4 (3.1) (2.3) (0.6)
(1.1) 1.5 4.2 7.2 1.4 399.4
2.8 1.5 4.3 7.4 1.4 410.0
2.9 1.5 4.4 7.6 1.5 419.2
3.0 1.6 4.5 7.8 1.5 427.9
(182.6) (1.5) (184.1)
(186.4) (1.6) (188.0)
(190.4) (1.6) (191.9)
(194.4) (1.6) (196.0)
215.3
222.0
227.2
231.9
(215.3)
(222.0)
(227.2)
(231.9)
(215.3)
(222.0)
(227.2)
(231.9)
0.0
(0.0)
50.0
50.0
50.0
50.0
All numbers in $mm except per share data
Debt 2008
2009
For fiscal year ending June 30, 2010 2011
Beginning cash Cash floor Cash flow available for debt service
161.4 50.0 181.9
Cash available for debt repayment
293.4
Revolving credit facility Beginning balance Issuance / (repayment) Ending balance Interest expense Commitment fee
150.0 (150.0) 150.0 4.9 0.8
Cash available for debt repayment Term loan facility Beginning balance Issuance / (repayment) Ending balance Interest expense
143.4
1,750.0
1,750.0 (143.4) 1,606.6 109.1
Cash available for debt repayment Senior unsecured notes Beginning balance Issuance / (repayment) Ending balance Interest expense
900.0 900.0
900.0 72.0
Cash available for debt repayment Capital leases Beginning balance Issuance / (repayment) Ending balance Interest expense Debt summary Revolving credit facility Term loan facility Senior unsecured notes Capital leases Total
65.3 65.3
150.0 1,750.0 900.0 65.3 2,865.3
65.3 10.1
1,606.6 900.0 65.3 2,571.9
Interest expense Revolving credit facility Term loan facility Senior unsecured notes Capital leases Total Cash balance Cash interest income Interest expense, net
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5.6 109.1 72.0 10.1 196.8 161.4
50.0 1.1 195.8
iscal year ending June 30, 2012 2013
2014
2015
50.0 50.0 215.3
50.0 50.0 222.0
50.0 50.0 227.2
50.0 50.0 231.9
215.3
222.0
227.2
231.9
1.5
1.5
1.5
1.5
215.3
222.0
227.2
231.9
1,606.6 (215.3) 1,391.4 97.4
1,391.4 (222.0) 1,169.4 83.2
1,169.4 (227.2) 942.1 68.6
942.1 (231.9) 710.2 53.7
900.0
900.0
900.0
900.0
900.0 72.0
900.0 72.0
900.0 72.0
900.0 72.0
65.3
65.3
65.3
65.3
65.3 10.1
65.3 10.1
65.3 10.1
65.3 10.1
1,391.4 900.0 65.3 2,356.7
1,169.4 900.0 65.3 2,134.7
942.1 900.0 65.3 1,907.4
710.2 900.0 65.3 1,675.5
1.5 97.4 72.0 10.1 181.0
1.5 83.2 72.0 10.1 166.8
1.5 68.6 72.0 10.1 152.2
1.5 53.7 72.0 10.1 137.3
50.0 0.5
50.0 0.5
50.0 0.5
50.0 0.5
180.5
166.3
151.7
136.8
All numbers in $mm except per share data
Calculations
Beginning PP&E Capex Depreciation Ending PP&E
For fiscal year ending June 30, 2010 2011
2008
2009
178.2
204.0
1,013.2 150.3
1,013.2
1,014.1
Beginning retained earnings Net income Dividends Ending retained earnings
1,014.1 178.8 101.4 1,091.5 1,500.0 252.2
1,500.0
1,752.2
Revenue projection
Revenues Company restaurant Franchise Property Total
2008
2009
1,795.9 537.2 121.6 2,454.7
1,880.5 543.4 113.5 2,537.4
For fiscal year ending June 30, 2010 2011 1,839.3 549.2 113.7 2,502.2
1,885.6 555.3 113.7 2,554.6
Restaurant COGS projection
Restaurant expenses Food, paper, and product costs Payroll and employee benefits Occupancy and other operating costs Total
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2008
2009
564.3 534.7 439.0 1,538.0
603.7 582.2 457.8 1,643.7
For fiscal year ending June 30, 2010 2011 585.0 568.7 461.1 1,614.8
580.9 564.2 453.9 1,598.9
scal year ending June 30, 2012 2013
2014
2015
1,091.5 182.6 109.2 1,164.9
1,164.9 186.4 116.5 1,234.9
1,234.9 190.4 123.5 1,301.8
1,301.8 194.4 130.2 1,366.0
1,752.2 270.8
2,023.0 272.9
2,295.9 275.1
2,570.9 277.2
2,023.0
2,295.9
2,570.9
2,848.1
scal year ending June 30, 2012 2013
2014
2015
1,981.9 567.7 113.7 2,663.3
2,031.8 574.0 113.7 2,719.5
2,083.0 580.4 113.7 2,777.1
scal year ending June 30, 2012 2013
2014
2015
625.9 607.9 489.0 1,722.9
641.7 623.2 501.4 1,766.3
1,933.2 561.5 113.7 2,608.3
595.5 578.4 465.3 1,639.2
610.5 593.0 477.0 1,680.5
All numbers in $mm except per share data
Metrics
Operating metrics Revenue growth EBIT margin EBITDA margin Profit margin Credit metrics Total debt Net debt Total debt / EBITDA Net debt / EBITDA Total debt / (EBITDA - Capex) EBITDA / Interest expense
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2008
2009
0 0 0
0 0 0 0
For fiscal year ending June 30, 2010 2011
() 0 0 0
0 0 0 0
2,571.9 2,521.9 5.1 5.0 8.4 2.5
iscal year ending June 30, 2012 2013
2014
2015
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
2,356.7 2,306.7 4.4 4.3 6.6 3.0
2,134.7 2,084.7 3.9 3.8 5.6 3.3
1,907.4 1,857.4 3.4 3.3 4.7 3.7
1,675.5 1,625.5 2.9 2.9 3.9 4.1
