Pillsbury Co. said it will spin off its troubled Burger King subsidiary under a plan the company says is better for shareholders than the $5.23 billion takeover bid launched by Britain's Grand Metropolitan PLC.
The announcement Monday met with criticism from Grand Met and sparked skepticism among analysts."We are astounded that Pillsbury has chosen to break up the company instead of pursuing Grand Met's $60-per-share, all-cash offer," said Ian Martin, chief of U.S. operations for the liquor, gaming and franchise conglomerate.
Grand Met's tender offer, launched Oct. 4, was set to expire at midnight Tuesday. But with the offer conditioned on the elimination of Pillsbury's "poison pill" defense, Grand Met is likely to extend the offer until a Delaware judge rules on the pill's validity.
Under the plan approved by Pillsbury's board of directors, Burger King would be spun off to its shareholders as a separate public company.
Analysts have said the 5,500-restaurant chain could fetch as much as $2 billion if Pillsbury chose to sell it to an outside party. Grand Met has said it would keep the chain despite its troubles.
Steve Carnes, a former Pillsbury executive who is an analyst for Piper Jaffray & Hopwood Inc. in Minneapolis, said the plan "doesn't even come close to the $60" a share offered by Grand Met.
Carnes and analyst Malcom Knapp, who heads his own firm in New York, said the plan would add debt to an already troubled Burger King, making a turnaround of the world's second-largest restaurant chain less likely.
Pillsbury said it would distribute one share of Burger King common stock for each share of Pillsbury common stock, payable on Jan. 27 or earlier for shareholders of record on Dec. 2.
In addition, the company said Burger King would declare special dividends of cash and securities payable after the spinoff. The size of the special dividends was not disclosed.