Diageo in talks to give up bun fight and sell off Burger King for $3bn

Click to follow

Diageo has opened talks with Texas Pacific, the private equity group, about a $3bn (£2.2bn) sale of its troubled Burger King subsidiary.

The move indicates that Diageo may give up its plans for the Burger King flotation, which have been put on hold as a result of the BSE crisis and Burger King's own management problems.

John H Dasburg was installed at the helm of the company, replacing Dennis Malamatinis, who surprised the markets by resigning last year to head up the discount website Priceline in Europe.

Mr Dasburg, a former airline executive, is believed to favour a buy-out of the firm, and this has lead Diageo to open talks with venture capital firms.

Texas Pacific is understood to be leading the talks, though other firms are believed to be hovering. These include Apollo Advisors, Kohlberg Kravis Roberts and Citicorp Venture Captial.

The flotation of Burger King was forced on Diageo by investors unhappy about the group's dual focus on drinks and food. The appointment of Paul Walsh as chief executive led to a deal to sell the Pillsbury food- making business to General Mills, which was ironic as Mr Walsh previously ran Pillsbury.

Diageo announced last year that it would float 20 per cent of the Miami-based Burger King in New York. At the time it said that to sell more would incur a massive tax bill.

However, the fact it is now entertaining bids indicates that it believes it can solve the tax issue and would prefer a clean exit from the fraught restaurants business to a potentially messy float.

Texas Pacific is making a habit of divesting British companies of their troubled US operations. It is understood to be leading the bidding in the battle to buy Emap USA from the underperforming UK publisher.