UPDATE 1-RESEARCH ALERT-Deutsche Bank cuts Burger King to sell

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Fri Sep 3, 2010 12:47pm BST

* Says does not expect alternative bid for Burger King

* Recommends Wendy's/Arby's as better investment

Sept 3 (Reuters) - Deutsche Bank cut its rating on Burger King Holdings Inc BKC.N to "sell" from "buy," saying it was unlikely that an alternative bidder would emerge for the No. 2 U.S. fast-food chain, which agreed to be bought by private equity firm 3G Capital for $24 a share.

Analyst Jason West recommended Wendy's/Arby's Group Inc WEN.N as a better investment in the fast-food industry citing Wendy's successful breakfast menu and potential improvement for margins.

"While (the Burger King) deal does not resolve the fundamental challenges in the fast food industry, we do see positive implications for Wendy's/Arby's Group," West said in a note to clients.

West said 3G was paying a healthy price for Burger King, valuing the company at 17.8 times consensus earnings estimates for 2011. Whereas, Burger King's fast-food peer group was trading at 15 times on a comparable basis.

On Thursday, Burger King agreed to sell itself to investment firm 3G Capital for $3.26 billion, giving the company breathing room to fix its business and close the gap with leader McDonald's Corp (MCD.N). [ID:nN02193380]

Shares of Burger King closed at $23.59 Thursday on the New York Stock Exchange.

Wendy's/Arby's shares closed at $4.4. The stock has fallen 21 percent since touching a year-high in late April.

(Reporting by Mihir Dalal in Bangalore; Editing by Maju Samuel)

((mihir.dalal@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: mihir.dalal.thomsonreuters.com@reuters.net)) Keywords: BURGERKING/RESEARCH DEUTSCHEBANK/

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