The buyer is a consortium of U.S. venture capital firms led by Texas Pacific Group, a U.S. venture capital firm based in Forth Worth, Texas. The consortium's other members are Boston-based Bain Capital and the private equity arm of U.S. investment bank Goldman Sachs.
The long-awaited deal, reached after days of intense negotiations, is crucial to Diageo's strategy of focusing on its more lucrative business of making and selling alcoholic beverages. The company's best-known brands include Johnnie Walker scotch, Guinness beers and Bailey's Irish Cream liqueur.
London-based Diageo, the world's largest liquor company, has long said it planned to unload Burger King in a sale or spinoff.
Diageo confirmed in May that it was in talks with potential buyers, but refused to identify them.
The Texas Pacific Group-led consortium emerged as the sole contender to buy Burger King after two rounds of bidding, said a source familiar with the talks leading to the sale.
Texas Pacific is believed to have close ties with senior executives at Burger King, and Bain has practical experience with the fast-food franchise business from its ownership of the Domino's Pizza chain. These contacts and knowledge about the fast-food industry appear to have given the consortium a competitive edge against other would-be buyers of Burger King, the source said.
Diageo said it plans to invest money from the sale in its premium drinks brands.
Diageo's predecessor company, Grand Metropolitan PLC, acquired Burger King in 1988 as part of its purchase of Pillsbury Co.
Diageo sold its Pillsbury foods unit to General Mills Inc. in October. Except for a 22 percent stake in cereal maker General Mills, Burger King is Diageo's only remaining non-liquor business. It contributes 6 percent to Diageo's group sales and profits.
Second only to McDonald's, Burger King has more than 11,435 restaurants worldwide.
Burger King's franchise owners had supported splitting off from Diageo, complaining of thin profit margins on flat domestic sales and ineffective marketing. They pressured management to take the business private rather than put it under Wall Street's scrutiny in a spinoff.
More than a year ago, chief executive John Dasburg said the fast-food chain had talked with a leveraged buyout firm, but no deal was ever announced.