Diageo to Sell up to 20% of Burger King

Diageo said Thursday that it plans to sell as much as 20% of Burger King to the public and may later shed the rest of the U.S. fast-food chain to focus on its liquor business.

The British company also said Burger King Chief Executive Dennis Malamatinas, 45, is resigning, effective Aug. 30.

During his three-year tenure, Malamatinas helped revive sales against McDonald’s Corp., the world’s largest fast-food operator. Miami-based Burger King had $1.3 billion in sales in fiscal 1999, or 7.4% of Diageo’s revenue.

The company said Malamatinas supported the plan to sell stock in the chain but resigned to spend more time with his family in Britain.

Diageo said last week said it was considering options for its Pillsbury unit, the maker of Green Giant vegetables, Haagen-Dazs ice cream and Pillsbury baked goods. Some investors have pressed Diageo Chief Executive John McGrath to shed food and restaurants to build up the liquor business, which includes Johnnie Walker whiskey, Smirnoff vodka and Guinness beer.

Diageo may sell the remaining 80% of Burger King or spin off the unit after 2002, when it would be able to exit the business without incurring prohibitive tax charges, Chief Operating Officer Paul Walsh said.

He declined to value the stake to be sold in the initial public offering.

McGrath said last week he’s interested in buying some of Seagram Co.’s liquor brands that the media company plans to sell as part of its merger with Vivendi and Canal Plus.

Colin Storm, now head of Diageo’s Guinness beer business, was named Burger King’s acting CEO. Stuart Fletcher, managing director of developing markets for Guinness, will take over management of the beer unit.

Burger King had 21% of the U.S. hamburger market in fiscal 1999. Franchisees operate 92% of its 11,037 restaurants, which are in the U.S. and 50 other countries.

Burger King was created in 1954 by Miami businessmen James McLamore and David Edgerton. Pillsbury bought Burger King in 1967 for $18 million. Grand Met acquired the burger chain in 1989 when it purchased Pillsbury. Grand Met and Guinness merged in 1997, forming Diageo.

Diageo’s American depositary receipts fell 56 cents to close at $35.44 on the New York Stock Exchange.