000762 Burger King Owners Oppose “Sin Off” Plan

Miami, FL - Independent Burger King restaurant operators want to block plans by the British parent Diageo to spin off 20% of the fast-food maker and have hired Wall Street advisers to help look for a private third-party buyer.

Diageo insisted that it will stick with plans announced in June for the partial sale on the New York Stock Exchange as “the option in the best interests of our shareholders.”

“Anything that leaves Diageo in control of any part of this company is absolutely unacceptable,” Julian Josephson, vice president of the Burger King National Franchisee Association, said. “We are not going to allow that to happen because frankly they have proven that they are not able to manage this brand.”

The association said it has retained an undisclosed investment bank to help identify potential buyers to “decouple” the world's second-largest fast-food company from its liquor and food parent.

“It's our intention to have a presentation and proposal to (Diageo) no later than the end of this calendar year,” association president Steven Lewis said. “They know the conditions in the marketplace. They know the performance of the brand. They know this is not time to be talking about any kind of spinoff.”

Diageo told the association, which represents U.S. restaurant operators, that it would look at any buyout offer, but the company said that is a fiduciary duty rather than a change of thinking about the future of the second-largest fast-food brand.

Diageo may consider selling more than 20% of Burger King, but the parent has cited a capital-gains tax obligation that would interfere with sale of the entire company before 2003.

“To hang your hat on this tax issue that lurks and lingers out there but not allow anyone to truly examine it tells me they're not acting” in the best interest of shareholders, Josephson said.

The association, which represents 70% of Burger King's 11,000 restaurants, is bothered by management turnover at the company's Miami headquarters, centralized control in London and a lack of reinvestment in Burger King.

The association also believes Diageo's plan to sell Pillsbury indicate the company is de-emphasizing food operations to concentrate on its liquor lines, including Guinness, Tanqueray, Johnnie Walker, Baileys and Smirnoff.

Pillsbury, with its baked goods, Green Giant frozen vegetable and Haagen- Dazs ice cream brands, is being sold to General Mills for $5 billion in stock and the assumption of $5.1 billion in debt.

“What they're telling the world now is they really don't want to be in the food business, and that's perfectly fine with us,” Lewis said. “We don't want them in the food business.”

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