Shares of Restaurant Brands International Inc QSR set a new 52-week high after the owner of the Burger King and Tim Hortons fast-food chains agreed to buy Popeyes Louisiana Kitchen Inc PLKI for $1.8 billion.
For each share of Popeyes, Restaurant Brands will pay $79 in cash, representing a 27-percent premium based on a pre-rumor assessment of Popeyes’ 30-day volume weighted average price.
Rating And 3 Reasons To Like The Deal
Analyst Will Slabaugh of Stephens maintains his Overweight rating and $58 target price on Restaurant Brands shares and gave three reasons why he likes the deal:
- “PLKI's attractive positioning in the quick-service space (growing chicken market).”
- “PLKI's limited international exposure with likely large potential.”
- “QSR's demonstrated and unique ability to accretively integrate other quick service brands (Tim Hortons).”
Related Link: Use Any Pullbacks In Restaurant Stocks To Add Exposure: Baird
Slabaugh noted that Restaurant Brands is paying 18.6x '17 EBITDA and 17.3x '18 EBITDA for Popeyes, according to consensus estimates. On a P/E basis, the '17 and '18 multiples are 32.2x and 27.8.
Also, the deal would increase the leverage of Restaurant Brands to 7.1x net debt/EBITDA on a pro forma basis from 6.5x at quarter end.
Shares of both Restaurant Brands and Popeyes set new 52-week highs at $57.98 and $78.85, respectively. At last check, shares of Restaurant Brands climbed 7 percent to $57.60 and Popeyes surged 19.17 percent to $78.79.
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