"This transaction provides for the future for Burger King Corp., its franchisees, employees and customers," said Paul Walsh, CEO of the London-based Diageo.
"Burger King Corp. has a very bright future," said David Bonderman, CEO of Texas Pacific. "We intend to support the company with capital, problem-solving and experience."
Headquartered in Forth Worth, Texas, Texas Pacific has specialized in buying and reforming distressed companies. Its current holdings include Oxford Health Plans, Magellan Health Services, Ducati Motor, J. Crew and semiconductor maker ZiLOG.
Two executives close to Burger King said Diageo had originally hoped to sell the Miami-based fast-food enterprise for at least $2.5 billion. The burger chain had 2001 sales of $11.1 billion.
Founded in 1954 by Jim McLamore and David Edgerton, Burger King quickly grew to be the second-largest burger chain in America by offering flame-broiled, made-to-order burgers. In 1967, the founders sold the chain to Pillsbury, which Grand Metropolitan bought in 1987. Ten years later, Grand Metropolitan merged with Guinness to form Diageo.
Diageo in March said it would consider options to dispose of the burger chain as it converted its entire portfolio to more profitable premium alcoholic beverages, which includes Guinness beer, Smirnoff vodka and Captain Morgan's rum. At the time, Diageo said certain tax liabilities would prevent the company from a spin-off or sale until 2003. It instead put the company up for an auction conducted by Greenhill & Co., with financial counsel from UBS Warburg and Merrill Lynch.
To support the separation, Diageo in March brought in John Dasburg as chairman, CEO and president of Burger King from Northwest Airlines. Mr. Dasburg then named Chris Clouser, Northwest's former marketing chief, to be chief marketing officer for the hamburger chain. Since then, the pair has replaced much of the senior executive team with their own appointees, many coming from Northwest Airlines.
As part of a March relaunch of the "Home of the Whopper," the company introduced 16 new or revived products, set strategic alliances with AOL Time Warner and Ebay, and began a kitchen upgrade.
Mr. Dasburg and the executive team will remain to continue the turnaround effort for an unspecified term, the company said.
"We're all staying as are our agencies, all with current titles," said Chief Global Marketing Officer Chris Clouser.