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LONDON -- Britain's Diageo expects to sell its Burger King chain this month to a Texas Pacific consortium despite one of the main franchisees AmeriKing filing for Chapter 11 bankruptcy protection, industry sources said on Wednesday.
Diageo's period of exclusive talks with the Texas Pacific grouping ends at the close of the year and the sources added that Diageo does not expect the exclusivity period to be extended or other potential buyers to be invited to bid. The news sent Diageo's shares more than 10 pence higher. The London-based group agreed a sale price of $2.26 billion back in July, but then last month Texas Pacific cut the price it was willing to pay to $1.5 billion amid difficulties in raising finance for the deal.
The sources added that the Chapter 11 filing of AmeriKing did not come as a surprise given the current price war between fast-food groups in the United States, especially the top two -- McDonald's Corp. and Burger King -- and it would not derail Diageo's sale of Burger King. Diageo is still keen to sell Burger King in a clean deal, but may be forced to take an equity stake in the buying consortium, which includes Bain Capital and Goldman Sachs Capital Partners, to complete the sale.
The July agreed price of $2.26 billion was dependent on Burger King's trading performance until the deal was closed, but in late October Diageo warned that price wars in the United States had led to a deterioration of business at Burger King.