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Sale Of Local Burger King Not A Done Deal; Expected Next Month

Castle Harlan pursued Caribbean Restaurants for nine years


May 13, 2004
Copyright © 2004 CARIBBEAN BUSINESS. All Rights Reserved.

Smart investors don’t let a good opportunity go by; they pursue it for years if necessary. New York-based Castle Harlan did just that. Now, its nearly decade-long efforts to purchase Caribbean Restaurants LLC, the parent company of local Burger King stores, have finally come to fruition.

The sale isn’t yet finalized, but Castle Harlan has already signed a definitive agreement to buy the company for $340 million. According to Caribbean Restaurants Senior Vice President & CFO Carlos Garcia, they should close the deal in six to eight weeks.

This is the end of a nine-year courtship for Castle Harlan Senior Managing Director David Pittaway. "When we first saw the opportunity to acquire Caribbean Restaurants in Puerto Rico nine years ago, we tried but weren’t successful. We tried again, but we were beaten by Oak Hill. We tried one more time–and won," he said.

Pittaway’s efforts were based on more than mere whim. With other restaurant chains in its portfolio, Castle Harlan knows a good operation when it sees one. "We know the qualities of a good restaurant chain. They are good real estate and good store operations," he said.

Pittaway said that because the 166 local Burger King stores have consistently enjoyed single-digit, same-store sales increases, the value of Caribbean Restaurants will increase organically, with little need for additional investment.

Investment firms such as Castle Harlan usually invest in companies and sell for a profit once their value increases. As a rule, Castle Harlan holds its companies an average of four or five years before selling them, Pittaway said. It is expected it will do the same with Caribbean Restaurants.

Castle Harlan has reason to be optimistic about it new purchase. "Burger King [on the U.S. mainland] has been having problems, but the stores here are doing spectacularly well," said Pittaway.

In fact, Carrols Corp., Burger King’s largest franchisee on the U.S. mainland with 351 stores, saw its net income plunge 66% in 2003, Associated Press reported in March.

In addition, the stateside Burger King, a private company owned by an investor group including Texas Pacific Group, Bain Capital, and Goldman Sachs Capital Partners, among others, recently hired a new lead creative advertising agency, its fifth since 2001.

Management was also reshuffled after Brad Blum was appointed CEO in December 2002. Robert Nilsen, hired as president last year, resigned in February.

Local operations haven’t been affected by the instability.

Pittaway explained that Castle Harlan won’t intervene in local Burger King operations. "We leave that to management. They are closer to the customer. Of course, we do monitor operations, see consumer surveys, and make sure everything is being done right, but we don’t tell them what to do," he said.

Castle Harlan will support Caribbean Restaurants’ expansion plans, he said. "We think the rate at which Burger King is expanding [about six stores per year] is sustainable. It’s up to them to find the locations and we will help with the finances," he said.

This Caribbean Business article appears courtesy of Casiano Communications.
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