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Equity Marketing Secures Long-Term Deal With Burger King

Equity Marketing Secures Long-Term Deal With Burger King

By CONOR DOUGHERTY

Staff Reporter

Equity Marketing Inc., a Los Angeles promotional toy manufacturer, has disclosed plans to sign a long-term contract with Burger King Corp. that would guarantee it a “significant majority” of Burger King’s premium manufacturing business worldwide.

The deal, cited in a Dec. 2 Securities and Exchange Commission filing, is expected to be complete in the next two months and would remove a cloud of uncertainty from the company’s future. Burger King is its largest customer, accounting for more than two-thirds of all revenues for each of the past several years.

“It removes a concern that was attached to the company,” said Jeffrey Thomison, an analyst with J.J.B. Hilliard, W.L. Lyons Inc. (Thomison said his firm has not provided any investment banking services for Equity Marketing.)

Equity Marketing designs promotional programs and products for Burger King, such as its current line of “Simpsons” watches. Many of the promotions have entertainment tie-ins, including a line of “Lord of the Rings: The Fellowship of the Ring” glasses that arrived at Burger King restaurants when the film was released last year.

The filing did not discuss the dollar amount of the deal or the length of the contract, which it characterized as “longer term.”

Diageo PLC, the London-based liquor company that owns Burger King, is in negotiations to sell the burger chain to a private equity consortium led by Texas Pacific Group. Diageo said it would renegotiate the terms of the $2.3 billion sale in November because Burger King’s performance has fallen off because of a recent price war with McDonald’s. “The sale of Burger King by Diageo will not affect our relationship with Burger King,” said a spokeswoman for Equity Marketing.

In the filing, the company said, “Management believes the new contracts will provide the company with a guaranteed significant majority of Burger King’s premium manufacturing business worldwide during the term of the agreement, thereby improving the overall visibility and predictability of the company’s Burger King related revenues during the period.”

Burger King officials did not return calls, but the company confirmed it would retain Equity Marketing as its primary creative and manufacturing agency for promotional programs in a Dec. 2 announcement that it had signed a division of Chicago-based DraftWorldwide as its promotional agency of record.

With the Burger King business locked in, Thomison said he hopes Equity Marketing will expand its other lines of business.

The company has moved to wean itself from its Burger King business through the $10.3 million acquisition of the principal assets of Promotional Marketing LLC, which specializes in promotions and events, in July. In July 2001 the company acquired Logistix Ltd., a marketing agency, for $12.1 million.




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