Burger King Worldwide Inc. agreed to acquire Tim Hortons Inc. for about 12.5 billion Canadian dollars ($11.4 billion) in a deal that creates the third-largest fast-food company and moves its headquarters to Canada.
Tim Hortons investors will receive C$65.50 in cash and 0.8025 a share of the combined entity for each share they own, the companies said in a statement today. The price deal values each Tim Horton share at C$94.05 based on Burger King’s closing price yesterday.
The purchase gives Burger King access to a coffee brand with a cult following, which may help boost breakfast sales. Tim Hortons, Canada’s biggest seller of coffee and doughnuts, also lets Burger King get into the grocery business by selling packaged coffees at supermarkets in North America. The new combined business would have about $23 billion in system sales and more than 18,000 restaurants in 100 countries.
The acquisition also moves the merged company’s global headquarters to Canada to take advantage of lower corporate taxes. When the companies disclosed the talks on Aug. 24, it revived debate over American companies shifting their headquarters to other countries in search of lower corporate tax bills. President Barack Obama criticized the practice in July, and his aides said that the administration would take action to stop the trend.
3G Capital, the investment firm that owns Burger King, will have about 51 percent of the new company. Warren Buffett’s Berkshire Hathaway Inc. also has committed $3 billion of preferred equity financing, according to the statement, which didn’t disclose terms on the stake. Omaha, Nebraska-based Berkshire won’t participate in managing the restaurant business.
3G, which was co-founded by Brazilian billionaire Jorge Paulo Lemann, joined Buffett last year in a $23.3 billion takeover of HJ Heinz Co. Buffett bought half the ketchup maker’s common stock for about $4.25 billion and invested $8 billion for preferred shares that pay a 9 percent annual dividend and gave Berkshire warrants to buy an additional 5 percent stake.
“3G does a magnificent job of running businesses,” Buffett said in May at his company’s annual meeting in Omaha. “We’re very likely to partner with them, perhaps on some things that are very large.”
Burger King, the second-largest U.S. burger chain, has struggled to boost North American same-store sales and compete with McDonald’s Corp.’s breakfast fare. Buying Tim Hortons would give Burger King a coffee brand that’s coveted by Canadians, as well as some Americans, to help revamp its breakfast lineup.
Burger King also may be in a position to expand Tim Hortons restaurants in the 98 countries where it operates. There may be supply-chain, marketing and administrative cost savings.
Within the new parent company, the two chains will remain stand-alone businesses and maintain their current headquarters. Burger King is run from Miami, while Tim Hortons is based in the Toronto suburb of Oakville.
© Copyright 2014 Bloomberg News. All rights reserved.