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Burger King and Tim Hortons agree merger deal

Article By: ,  Financial Analyst
August 26, 2014 6:15 PM

A merger that would create the world's third-largest fast-food chain after McDonalds and KFC has been agreed between Burger King and Tim Hortons.

Burger King has confirmed that it plans to buy the Canadian coffee and doughnut chain for about $11 billion (£6.6 billion). With 18,000 restaurants in 100 countries, the new group would have a market capitalisation of about $18 billion and annual sales in the region of $23 billion.

Burger King's majority shareholder, 3G Capital, will own about 51 per cent of the merged company, with Warren Buffet's investment firm Berkshire Hathaway also contributing to the financing.

"Berkshire Hathaway has committed $3 billion of preferred equity financing. Berkshire is simply a financing source and will not have any participation in the management and operation of the business," the companies said in a statement.

Tim Hortons shareholders will receive CAD65.50 in cash and 0.8025 common shares of the new company per Tim Hortons share, representing a 30 per cent premium based on the coffee and doughnut company’s August 22nd closing price.

Tax Inversion

The firms have said that any new group would have its headquarters in Canada, where corporate taxes are lower, in a move know as a tax inversion deal, Bloomberg reports.

President Barack Obama has previously criticised 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.

Burger King's shares rose 20 per cent yesterday (August 25th) to $32.40, the biggest jump since the stock debuted on the New York Stock Exchange two years ago. Tim Hortons climbed 19 per cent to CAD82.03.

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