Hot potato

13 December 2002 By Camilla Palladino

To get the deal done, the UK drinks group has had to take a 34% cut on price, which falls to 20% after tax. Diageo has not managed to cut BK completely loose either. It has had to guarantee a large chunk of the financing.

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Diageo has agreed the sale of Burger King under revised terms to a group of private equity buyers. These are Texas Pacific Group, Bain Capital Partners and Goldman Sachs Capital Partners.

The headline price of the deal has fallen from $2.26bn to $1.5bn. But whereas Diageo was going to have to pay $175m tax on the first transaction, it gets a $100m tax credit on the current one. Diageo is getting $1.2bn in cash. The difference is $86m BK debt and a loan to the buyers of $212.5m.

The UK group is guaranteeing $1.062bn of the financing, $750m of which matures in 5years, $212.5m of which matures in 10.5 years and a $100m revolving credit facility. The buyers are incentivised to refinance the debt before maturity. Diageo will pay any additional interest incurred by BK after the refinancing, provided the terms are satisfactory to Diageo.

Context News

Hot potato

13 December 2002 By Camilla Palladino

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