020630 Britain’s Diageo Nears Burger King Sale

London - Britain's Diageo Plc is close to selling Burger King to a John Dasburg management team backed by Texas Pacific Group in a $2.3-billion deal that the drinks giant hopes to announce in July, sources familiar with the talks said.

Two rival bidding groups have reached the final stages of the auction for the world's number two hamburger chain, but private equity group Texas Pacific with Burger King Chairman Dasburg on board is seen ahead of a rival Blackstone-led bid, they added.

Diageo, the group behind Smirnoff vodka and Guinness beer, had hoped to sell-off the underperforming fast-food chain before entering its closed period on July 5 ahead of their results, but delays in arranging financing is likely to see a deal announced later in July.

"Texas Pacific have Dasburg onsite and has been doing all the talking to the U.S. franchisees, the deal looks close to signing in July," said one banking sources close to the talks.

Diageo declined to comment.

Dasburg's team is also backed by Goldman Sachs Capital Partners and Bain Capital, and the team has been a leading contender since Diageo officially put the business on the block in March. The Blackstone Group has put together a joint private equity bid with Thomas H. Lee Partners and is advised by Merrill Lynch.

"There are only two parties being talking about, and those are Texas Pacific and Blackstone," said one industry source.

Dasburg has said April like-for-like restaurant sales were "up firmly" and had improved in May, while a Diageo trading statement due in early July is likely to show how successful the recovery has been during January-June. Diageo announces its annual results for the year to June 30 in early September.

The 11,500-strong Burger King chain has shown tentative early signs of recovery with its North American comparable restaurant sales up one percent in the last six months of 2001 and overall worldwide sales up just 0.4 percent.

But new products, from vegetarian burgers to thicker milkshakes, are expected to have helped boost sales in the first six months of 2002 as Dasburg moves to revive business at "The Home of the Whopper" and increase competition on industry leader McDonald's Corp.

The Burger King auction is being conducted by small specialist investment bank Greenhill, where Diageo Chairman James Blyth is one of the 11 partners.

Diageo's initial plan back in June 2000 was to float the Burger King business, but this was put on ice as equity markets turned down and an auction was later launched.

Dasburg was brought in as chairman and chief executive in February 2001 from NorthWest Airlines to turnaround the Miami-based group, which has suffered from years of sagging sales, management changes and fractured relationships with restaurant franchisees in the U.S.

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