Tags: Burger-King | Call-Option | Trading | 3G-Capital | Takeover

Burger King Call-Option Trading Surged Before 3G Capital's Takeover Offer

Thursday, 02 Sep 2010 03:02 PM

Trading of bullish Burger King Holdings Inc. options surged to a record Aug. 25, a week before the second-largest U.S. hamburger chain agreed to be acquired by 3G Capital, lifting the shares as much as 25 percent today.

Volume for calls to buy the stock jumped Aug. 25 to 37,427, or almost 20 times the average during the preceding four weeks, data compiled by Bloomberg show. Call trading exceeded that level yesterday, reaching 54,284, after the Wall Street Journal said the company was in talks to be sold.

Call options that convey the right to acquire shares for a given price by a certain date usually offer higher returns to traders speculating on takeovers. The U.S. Securities and Exchange Commission polices the market to ensure investors aren’t engaging in insider trading.

“You don’t see 30,000 options being accumulated in Burger King ever,” said Alec Levine, a strategist at Wallachbeth Capital LLC in New York. “It’s probable that it was leaked information about the deal, and they seemed to know the pricing and the timing.”

Miguel Piedra, a spokesman for Miami-based Burger King, and 3G’s managing partner, Alex Behring, didn’t return phone messages seeking comment today. John Nester, a spokesman for the SEC, declined to comment.

October $20 calls were the most-active on Aug. 25, changing hands 20,714 times to account for more than half of call volume, according to data compiled by Bloomberg. Those contracts more than quadrupled to $3.50 today, a sevenfold gain from their close at 50 cents on Aug. 25.

Burger King rallied 24 percent to $23.43 as of 1:47 p.m. today in New York. The stock rose 3.6 percent on Aug. 27, at the time the biggest daily advance since May 10.

“There’s the potential that it was the use of inside information,” said Ophir Gottlieb, a trader and head of client services at Livevol Inc., a San Francisco-based provider of options market analytics. “I don’t want to scream bloody murder, but it’s not normal.”

Burger King agreed to be acquired by 3G Capital for $3.3 billion, giving the New York investment firm control over the chain. The $24-a-share price is 46 percent more than Miami-based Burger King’s close Aug. 31, before reports of a deal surfaced.

3G is an investment vehicle whose main investors are three Brazilian business partners — Jorge Paulo Lemann, Marcel Herrmann Telles and Carlos Alberto da Veiga Sicupira, according to three people with knowledge of the matter. The men founded Brazilian investment bank Banco de Investimentos Garantia SA and agreed to sell to Credit Suisse Group AG in 1998 for at least $675 million.

Lazard Ltd., JPMorgan Chase & Co., and Barclays Plc are advising 3G Capital, and Kirkland & Ellis LLP is legal counsel. Morgan Stanley and Goldman Sachs Group Inc. are advising Burger King, as are Skadden Arps Slate Meagher & Flom LLP and Holland & Knight LLP.

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Trading of bullish Burger King Holdings Inc. options surged to a record Aug. 25, a week before the second-largest U.S. hamburger chain agreed to be acquired by 3G Capital, lifting the shares as much as 25 percent today. Volume for calls to buy the stock jumped Aug. 25 to...
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2010-02-02
Thursday, 02 Sep 2010 03:02 PM
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