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Under the agreement, Diageo will receive $2,260 million in cash for Burger King Corporation on a debt free basis. Burger King Corporation will retain a minimum level of working capital, which will include $15 million of cash. A portion of the purchase price is dependent upon Burger King Corporation satisfying certain performance targets in its financial year ended June 30th.
The transaction conditions include purchaser's financing, Burger King Corporation meeting certain performance targets during the period to closing, there being no material breach at closing of contractual representations given by Diageo, and required regulatory approval. The transaction is expected to close in the fourth quarter of this calendar year.
Diageo anticipates that following completion of the transaction the cash proceeds will, in accordance with Diageo's commitment to value creation, be made available for reinvestment in its premium drinks business and for return to shareholders.
In March 2002, Diageo commenced a review of options for the separation of Burger King Corporation as the final step in its realignment behind premium drinks. The agreement announced today is an important step in the conclusion of that process.
Announcing the agreement, Paul Walsh, CEO of Diageo, said: "Today's announcement represents an important milestone in Diageo's journey. In the last two years since we announced our intent to exit food, we have brought together our global spirits, wine and beer businesses, including exciting new assets from Seagram. Now we will focus all our management skills to deliver sustainable top and bottom line growth and create still greater value for our shareholders."
This transaction provides for the future for Burger King Corporation, its franchisees, employees and customers. In the past sixteen months Diageo has brought together a new management team for Burger King, recast the strategy and delivered significantly improved performance across the business. Through to completion, and under its new owners, Burger King will be able to build on this improved platform, and I wish the business every success, " he finished.