Shares of Popeyes Louisiana Kitchen spiked more than 19 percent in intraday trading, hitting an all-time high, on Tuesday after Burger King and Tim Horton’s owner Restaurant Brands International said it will acquire the company in a deal valued at $1.8 billion.
Restaurant Brands will pay $79 a share in cash for the Popeyes restaurant chain, a 27 percent premium to Popeyes 30-trading day volume weighted average price of Feb. 10, the last trading day before media speculation of the deal.
The transaction is expected to close by early April 2017. Following the closing, Popeyes will continue to be managed independently in U.S.
Shares of Restaurant Brands were up about 6.4 percent.
“With this transaction, RBI is adding a brand that has a distinctive position within a compelling segment and strong U.S. and international prospects for growth,” Daniel Schwartz, chief executive officer of Restaurant Brands.
Talk of a potential deal surfaced last week. Some suspect Restaurant Brands could help the Georgia-based Popeyes reach more global diners while bolstering Restaurant Brands’ already strong roster of restaurants.
“We believe the Popeyes acquisition would provide Restaurant Brands a concept that provides steady organic and unit growth in both the North American and overseas markets,” Stephen Anderson, an analyst at Maxim Group, wrote in a research note last week.
He added that Popeyes has “shown stronger performance worldwide in the past two years” compared to Restaurant Brands’ Burger King and Tim Horton’s chains.
However, some analysts were skeptical about the deal, saying the Restaurant Brands is still busy integrating Tim Horton’s into its portfolio.
“The most apparent question to us is what does Restaurant Brands gain from acquiring Popeyes?” Andrew Charles, a Cowen analyst, wrote in a research note last week. “In our view, Restaurant Brands has not accomplished the primary objective of acquiring Tim Horton’s, which was growing the brand internationally.”
Charles noted that it took the company longer than expected to sign franchise development agreements in the Phillippines, United Kingdom and Mexico. He suggested that this could mean that Restaurant Brands is not “ready to acquire another brand.”
The company will finance the transaction with cash on hand and a financing commitment from J.P. Morgan Chase and Wells Fargo.
Restaurant Brands and Popeyes did not immediately respond to CNBC’s request for comment.