Diageo to Sell Part of Burger King - TheStreet

Updated from 1 p.m. EDT

Diageo

(DEO) - Get Report

, the international food and liquor giant, said Thursday that it plans to sell a portion of its

Burger King

business on the

New York Stock Exchange

, possibly in preparation for a future sale of the entire company.

The company also said Dennis Malamatinas, the chief executive of the world's No. 2 hamburger chain, would step down and resign from the Diageo board on Aug. 30. Colin Storm, chief executive of Diageo's

Guinness

beer unit, will act as temporary chief executive of Burger King until the company finds a permanent replacement.

The company did not say how much of Burger King it will initially sell, how much money it intends to raise, or when it expects to offer the shares.

Diageo's American depository receipts traded down 9/16, or 1.5%, at 35 7/16 Thursday.

For Diageo, the move to shed a portion of Burger King could be the first step in sifting out the huge patchwork of liquor and food brands that the company owns, following its formation from the merger of

Guinness

and

Grand Metropolitan

in 1997. Many industry watchers have said Diageo might benefit from focusing on the core, profitable liquor side of its business.

The London-based company, through its

United Distillers and Vintners

group and other units, is the world's No. 1 liquor and spirits maker with such brands as

Johnny Walker

,

Smirnoff

and Guinness. The company also owns food brands such as

Pillsbury

,

Green Giant

and

Haagen-Dazs

.

The flotation of Burger King could "encourage hopes of a sale of Pillsbury" and "will point strongly to Diageo mutating into a pure beverages company," which should expand its earnings and share value, said Sandy Soames, analyst at

Cazenove & Co.

in London. Cazenove rates Diageo a buy and has not underwritten stock or debt for the company.

The flotation, and the change in management, could also boost the value of Burger King, some analysts said.

"The history of the restaurant industry strongly suggests that concepts fare better when they are not part of a larger conglomerate," said Mark Kalinowski, restaurant analyst at

Salomon Smith Barney

. "This is a positive concept."

Kalinowski said Burger King's shares are likely to be valued similarly to those of such fast-food rivals as

Wendy's

(WEN) - Get Report

and

Tricon

(YUM) - Get Report

, but not as highly as

McDonalds

(MCD) - Get Report

, which has commanded far higher stock valuations because of the large international presence of its brand.

Kalinowski does not cover Diageo, but his colleagues in London rate the stock a neutral. His firm hasn't done underwriting for Diageo in the last five years.