Tim Hortons parent buys chicken chain for $1.8 billion

TORONTO — The parent company of Tim Hortons and Burger King is making a move to add fried chicken to its repertoire with an offer to buy Popeyes in a friendly deal.

Restaurant Brands International said it will pay $1.8 billion US for the Louisiana-style fried chicken chain. That translates to $79 US per share in Popeyes Louisiana Kitchen Inc., which trades on the Nasdaq market.

“We’re really excited we’re adding another iconic and successful brand, one that has really rich Louisiana heritage that’s going to resonate with guests all around the world,” said RBI CEO Daniel Schwartz.

The deal doesn’t come as a surprise to analysts, said Will Slabaugh, managing director at Arkansas-based Stephens Inc.

“I think it was always hinted at that there might be more brands in the future,” he said, referencing RBI’s successful 2014 acquisition of Tim Hortons that led analysts to believe RBI could have a strong platform to roll in other quick-service restaurants.

However, there aren’t many chains that fit RBI’s criteria for acquisition. Slabaugh said the company is likely looking for chains that are attractive to consumers around the world — not just Americans.

Schwartz said RBI plans to accelerate Popeyes’ growth in the U.S. and beyond. The company has more than 2,600 restaurants, mostly in America, with 621 international locations.

“There is no reason that this brand can’t be multiple times its size in many, many years from now,” said Schwartz, adding that Popeyes is currently growing at a similar pace to Burger King when RBI first acquired that fast-food chain.

In 2010, Burger King was adding 173 net new restaurants globally per annum. Last year, that number grew to 735.

Schwartz credits that to RBI’s master franchisee joint venture growth model, which gives one or a group of franchisees the rights to expand the chain in a specific area. He said RBI would use the same model to grow Popeyes, whose footprint he says is underpenetrated compared to competitors such as KFC.

Popeyes shares soared on the news, closing at $78.73 US, a jump of $12.61 US or about 19 per cent from Friday. RBI stock also gained value, closing at $75.65 on the Toronto Stock Exchange, up $4.98 or about seven per cent.

The transaction will deliver immediate value to Popeyes shareholders, said CEO Cheryl Bachelder in a statement jointly issued with RBI.

The proposed takeover requires various approvals and support from more than half of Popeyes’ shareholders, but RBI expects the deal to close by early April. Popeyes’ management is expected to continue to operate the U.S. business.

RBI has its headquarters in Oakville, Ont., west of Toronto, with more than 20,000 restaurants in more than 100 countries and U.S. territories.

It’s unlikely this is the last major acquisition RBI will make, said Slabaugh, though he doesn’t expect any more announcements in the near future.

“Over time, I definitely expect them to acquire more brands.”

Schwartz said “it’s premature” to look beyond the current deal.