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Canaccord Genuity on Burger King, ConAgra, and Pandora


Commentary on Burger King's return to the NYSE, ConAgra's kosher crisis, and Pandora's new competitor, Spotify.


The following are excerpts from Canaccord Genuity analyst's commentaries.

Burger King Worldwide (BKW): Return to the throne.

Burger King's stock rose after it made its trading debut Wednesday on the New York Stock Exchange, bringing it back to the public market just about a year and a half after a New York investment firm took it private.

The world's No. 2 hamburger chain had last traded as a public company between 2006 and 2010 before it was purchased and taken private by investment firm 3G Capital. Burger King's return to the Big Board wasn't through an initial public offering, however. 3G Capital announced an unusual deal in April to sell a minority stake to Justice Holdings, a shell company co-founded by Bill Ackman. 3G Capital received $1.4 billion in exchange and retains a 71% stake in the company and only 16% of shares are available for sale to investors.

When the "reverse-merger" transaction was announced in April, Justice said it expected the fast-food chain's core profits in 2012 to almost double from 2010.

ConAgra Foods (CAG): Oy vey!

ConAgra Foods has been sued by consumers who contend that hot dogs and other products sold under its Hebrew National brand are not kosher. The lawsuit alleges that meat processing services provided to ConAgra by privately held AER Services fell short of the standards necessary to label Hebrew National products as kosher and did nothing to correct the problems and instead fired the employees or threatened to have them fired.

But AER is not a defendant in the lawsuit. "The allegations in the complaint regarding AER are completely and utterly false," Shlomoh Ben-David, AER's President, said in a telephone interview. "There is no basis for them, and they are without any merit." ConAgra has long used the slogan, "We answer to a higher authority" to promote Hebrew National products. As a result, consumers claimed the meat seller misled consumers and charged premium prices.

Eleven individual consumers filed their complaint in May in Minnesota state court and are seeking unspecified damages and an injunction against further mislabelling. Their lawsuit seeks class-action status for US purchasers of Hebrew National products over the last four years, and alleges negligence and violations of state consumer fraud laws.

Other ConAgra brands include Chef Boyardee, Healthy Choice, Peter Pan, and Reddi-wip. These brands are not part of the lawsuit.

Pandora Media (P): What am I going to do with my Walkman now?

Pandora Media is up to its elbows in competition after rival Spotify announced plans to offer a free online radio service for mobile devices in the US that directly challenges its own app. Until now, this feature was only available to paying subscribers who coughed up $9.99 each month to take Spotify mobile.

Like Pandora, the Spotify mobile radio app will let users create music stations based on artists, styles, and other songs they've "liked" on the app, posing a major threat to Pandora's market share.

Spotify's announcement comes after last week's news that Songza Media, a new online radio service that gained popularity by opting to use display ads instead of audio ones, leapfrogged Pandora as the most popular free music app for Apple (AAPL) devices. Pandora is the only one of those companies that trades publicly. The company said last month that its first-quarter loss tripled as the cost of acquiring music and marketing rose faster than revenue.

Editor's note: For more information on Canaccord Genuity, click here.
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No positions in stocks mentioned.
Canaccord Financial and its affiliated companies may have a Corporate Finance or other relationship with the companies mentioned and may trade in any of the Designated  Investments mentioned herein either for their own account or the accounts of their customers, in good faith and in the normal course of market making. The authors have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Corporate Finance activities, or to coverage herein.
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