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I have been pretty tough on Burger King's (BKC) LIPO (Leveraged Initial Public Offering) in the past and its management plan for expansion and growth. Burger King was a pretty easy target after Texas Pacific Group, Bain and Goldman Sachs all took a fat special dividend paid for in debt immediately prior to the IPO.

Interesting, therefore, that the Wall Street Journal, which, in one breath, wonders after (subscription required) the poor state of the restaurant industry:

Activist shareholders and private-equity firms are reshaping the restaurant industry as it retrenches after years of overbuilding and struggles to lure cash-strapped diners, with Applebee's the latest chain to respond to a big shareholder.

...elsewhere (subscription required) in the same edition outlines Burger King's new-found good fortune owed to exactly the thing that others in the industry are being skewered for:

Burger King Holdings Inc., benefiting from aggressive restaurant expansion and the rollout of a breakfast value menu, reversed a year-earlier loss and posted better-than-expected fiscal third-quarter earnings Friday.

The world's second-largest hamburger chain said it expects to beat its revenue goal for the fiscal year, which ends in June. Revenue is forecast to increase 6%-7% and adjusted net income more than 20%.

[...]

Burger King said its strong free cash flow allowed it to pay down debt to historically low levels in recent months.

Pretty impressive, actually, considering what seemed, at least to me, to be a rather rudderless forward-looking strategy and the general state of the industry.

Personally, I noticed that Burger King's LIPO left a bad taste in my mouth. I wouldn't have bought the stock in the IPO, or since. However, some pundits used the LIPO as an excuse to decry the private equity world and name 2007 the "year of private equity crisis." Never mind that the investors who bought into the Burger King IPO did so with open eyes, well aware of the company's debt load. (And the patient ones seem, for now, to have done moderately well.) Even unpopular LIPOs seem to have a place in the private equity schema.

Wouldn't it be ironic if some activists, noting the historically low debt load on Burger King now, decided to pile in and demand a dividend recap?

Related: Burger King F3Q07 (Qtr End 3/31/07) Earnings Call Transcript

BKC since IPO:

BKC

Source: Burger King's Post-LIPO Recovery