Buffett Provides $3 Billion of Financing on Burger King Deal

Image: Buffett Provides $3 Billion of Financing on Burger King Deal (Paul Morigi/Getty Images)

Tuesday, 26 Aug 2014 08:53 AM

 

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Warren Buffett’s Berkshire Hathaway Inc. is providing financing for Burger King Worldwide Inc.’s planned takeover of Tim Hortons Inc., the latest deal being backed by a commitment from the billionaire.

Berkshire will invest $3 billion for preferred equity, according to a statement today from the restaurant companies that didn’t state the annual dividend on the stake. Buffett’s firm won’t be involved in running the restaurant company.

Buffett, who accumulated a cash pile of more than $55 billion, injected capital into financial firms like Goldman Sachs Group Inc. and Bank of America Corp. at times of crisis, and helped fund deals such as Mars Inc.’s purchase of Wm. Wrigley Jr. Co. Jorge Paulo Lemann’s 3G Capital, which controls Miami-based Burger King, joined Buffett last year in a takeover of HJ Heinz Co. Berkshire invested $8 billion in that deal for preferred shares paying a 9 percent annual dividend.

“3G does a magnificent job of running businesses,” Buffett said in May at his company’s annual meeting in Omaha.

Burger King today said it would acquire the Oakville, Ontario-based coffee-and-doughnuts chain for about C$12.5 billion ($11.4 billion) in a deal that creates the third-largest fast-food company and moves its headquarters to Canada.

Inversion Deals

President Barack Obama has criticized American companies that move to other nations in search of lower corporate tax bills. Between mid-June and late July, at least five large American companies announced plans to make such a shift -- known as an inversion. That includes AbbVie Inc. and Medtronic Inc.

Buffett has supported Obama’s push to increase personal income taxes for the wealthiest individuals while striking deals that reduce Berkshire’s obligations to the government. This year, his company limited taxes on more than $1 billion of gains in Graham Holdings Co. stock by swapping the shares for assets owned by the former Washington Post publisher.

“We don’t add a tip” on top of our tax bill, Buffett said at the annual meeting. “And we do certain transactions that are tax-driven.” He cited renewable-energy investments that help lower Berkshire’s taxes.

Later that month, he addressed drugmaker Pfizer Inc.’s bid for London-based AstraZeneca Plc, an offer that was subsequently withdrawn.

“I’m not saying they’re doing anything illegal at all in following the rules on inversion,” Buffett told CNBC, according to a transcript on the business news station’s website. “I would personally change that part of the law. And other people might change the part of the law about wind tax credits, but I’m not attacking Pfizer for following the U.S. tax law.”

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