Buffett Helps Burger King Seal Deal to Buy Out Tim Hortons

Burger King In Talks To Acquire Canadian Chain Tim Horton's
Spencer Platt/Getty Images
MIAMI -- Burger King struck an $11 billion deal to buy Tim Hortons (THI) that would create the world's third largest fast-food company and could make the Canadian coffee-and-doughnut chain more of a household name around the world.

Executives said the two chains will continue to be run independently, however, meaning Burger King (BKW) customers shouldn't expect to see Tim Hortons coffee or doughnuts popping up on menus.

"There's no plans to mix the products or do co-branding," said Daniel Schwartz, CEO of Burger King and a principal of 3G Capital, which owns a majority stake in the hamburger chain.

The corporate headquarters of the new company will be in Canada. Burger King stressed that the deal wasn't being driven by a desire to take advantage of the country's lower tax rates, but the international growth possibilities of Tim Hortons.

Since 3G Capital acquired Burger King in 2010, the investment firm has been aggressively expanding the chain's presence overseas. It has focused on striking deals with local operators in countries including China and Russia to open more Burger King locations while minimizing its own costs and risks.

In the last year, for example, it accelerated expansion and opened more than 700 Burger King locations. Burger King has nearly 14,000 locations globally, but the company has noted that's still far less than the more than 35,000 McDonald's restaurants around the world.

3G said it will take its expertise in expanding Burger King and apply it to Tim Hortons.

Back in the U.S., the deal also gives 3G a stronger foothold in the fast-growing coffee and breakfast market -- areas where Burger King has lagged leaders including Starbucks (SBUX) and McDonald's (MCD). Tim Hortons CEO Marc Caira noted the chain's recent efforts to become a bigger player in the U.S., including updated store designs that feature couches and fireplaces.

Caira said he felt Tim Hortons could "win much quicker" in the U.S. with the help of Burger King.

Breakfast and coffee have been hot growth areas in the U.S. fast-food industry. Between 2007 and 2012, breakfast grew faster than any other segment in the restaurant industry at about 5 percent a year, according to market researcher Technomic. Winning over customers will nevertheless be a challenge for Tim Hortons, given the intensifying competition in recent years.

Warren Buffett's Berkshire Hathaway (BRK-A) (BRK-B) is helping finance the Tim Hortons deal with $3 billion of preferred equity financing, but won't have a role in managing operations.

After the deal, which is expected to close by early next year, the new company would have about $23 billion in sales and more than 18,000 locations.

3G Capital will own about 51 percent of the new company. The firm, which has offices in Brazil and New York, has been slashing costs at Burger King since buying it in 2010. Last year, 3G teamed up with Berkshire Hathaway to buy ketchup-maker Heinz as well.

Some analysts have suggested that Canada's lower tax rates stand to benefit Burger King over time. But Schwartz said the company doesn't expect to achieve any "meaningful tax savings" as a result of the deal. He said Burger King's blended tax rate in the U.S. is in the mid- to high 20s, comparable to the current effective rates in Canada.

Under the deal, Burger King will pay $65.50 Canadian ($59.74) in cash and 0.8025 common shares of the new company for each Tim Hortons share. This represents total value per Tim Hortons share of $94.05 Canadian ($85.79), based on Burger King's Monday closing stock price. Alternatively, Tim Hortons shareholders may choose either all-cash or all stock in the new company.

Tim Hortons stock was up nearly 9 percent percent in midday trading Tuesday. Burger King's shares fell more than 3 percent.


Increase your money and finance knowledge from home

Investing in Real Estate

Learn the basics of investing in real estate.

View Course »

Investor’s Toolbox

Improve your investing savvy with the right financial toolset.

View Course »

Add a Comment

*0 / 3000 Character Maximum

143 Comments

Filter by:
YourFtr

Obama has to save the Burger-flipping jobs;
because they are the only ones he has created in six ( 6 ) years......

August 27 2014 at 12:54 AM Report abuse +1 rate up rate down Reply
coolfish123

well I used to prefer a Whopper but guess Jack in the Box will get my business now

August 26 2014 at 11:32 PM Report abuse rate up rate down Reply
1 reply to coolfish123's comment
Robert Smith

Really, why?

August 26 2014 at 11:40 PM Report abuse rate up rate down Reply
raddison4x

Warren Buffet is Obama's buddy who said people should pay more taxes...????Hmmm???Do I smell another liberal hypocrisy?

August 26 2014 at 6:50 PM Report abuse +3 rate up rate down Reply
1 reply to raddison4x's comment
Syl

Contrary to your belief that all "liberals" or all of Obama's "friends" think alike; people aevery individuals with unique thoughts and ideas. Groups of people have similar thoughts but it does not mean that they agree on everything. Some people are so immature.

August 26 2014 at 8:24 PM Report abuse -2 rate up rate down Reply
2 replies to Syl's comment
gee.effwye

Nice try. Progressive and individual anything don't belong in the same sentence.

August 26 2014 at 9:16 PM Report abuse +2 rate up rate down
hony53

Oh "Syl", what an elitist, pompous response. Spoken like a true intellectual snob, and mostly just plain hogwash!

August 26 2014 at 9:18 PM Report abuse rate up rate down
janis539

too bad they don't focus on better burgers instead of lower taxes!

August 26 2014 at 6:36 PM Report abuse +1 rate up rate down Reply
candodan

BOYCOTT!!!!

August 26 2014 at 6:05 PM Report abuse +1 rate up rate down Reply
1 reply to candodan's comment
raddison4x

Why is the answer to everything "Boycott"???? How about Boycott the US gov until they lower taxes?

August 26 2014 at 6:52 PM Report abuse +2 rate up rate down Reply
2 replies to raddison4x's comment
hony53

Liberals don't worry about taxes because, as progressive parasites, they don't PAY any taxes.

August 26 2014 at 9:20 PM Report abuse rate up rate down
coolfish123

well if we all would be more picky about who we buy things from we could get things more in line with what our values should be

August 26 2014 at 11:35 PM Report abuse rate up rate down
Ben

It just astonishes me that fools in this country really think that if we lowered the tax rate on companies in this country that everything would be fine. You people assume that these business leaders got where they are by being fair and honest and ethical people. Grow up. They got where they are any way they could. It's about money people. Making your money theirs. If you own stock in the company that owns BK you woun't get a huge dividend check for this. The people at the top will take it all. Stop the fantasy that these people do what's best for the stock holders or the American people. You people really need to get over this dream, fantasy what ever it is your in. Big business leaders do what is best for them. If anything good happens for the stockholders or this country it only means they couldn't stop it from happening.

August 26 2014 at 5:24 PM Report abuse +2 rate up rate down Reply
2 replies to Ben's comment
corpforce1

Really....and raising taxes will accomplish what? Can we not all agree that it is not a case of to little tax money that the government struggles with, it is the total inept ability that they squander every single penny they get out of your and my pocket. It's akin to throwing money at a bad situation will make it better syndrome. Would you give an alcoholic more money and expect it to be used for some good?

August 26 2014 at 5:56 PM Report abuse rate up rate down Reply
2 replies to corpforce1's comment
Syl

If it is right for companies to dodge taxes, shouldn't we all skip tax season? Wonder what would happen if we all stopped paying taxes? Say goodbye to clean water, paved roads, clean air, police, military, judicial system, public schools, hospitals. Wow that would be great!

August 26 2014 at 8:30 PM Report abuse -1 rate up rate down
gee.effwye

Hey syl.....canada has universal health care and 15% corporate taxes.

August 26 2014 at 9:17 PM Report abuse rate up rate down
gee.effwye

Fed gove spending nearly $4 trillion a year. Big part of problem.

No go look up what Feduciary obligation means.

August 26 2014 at 9:19 PM Report abuse -1 rate up rate down Reply
Larry

No surprise that one of Obama's buddies is on the wrong side of this. Remember when he named the head of GE (which paid NO taxes) as the person to address shipping jobs overseas when GE is one of the biggest offenders?

August 26 2014 at 4:55 PM Report abuse +1 rate up rate down Reply
1 reply to Larry's comment
fredonesaid49

Your full of it Larry, more of your kind republican conservative bullcrap, Obama is dead set against this deal, it was all over the news today so stop with your lies.

August 26 2014 at 5:52 PM Report abuse +1 rate up rate down Reply
1 reply to fredonesaid49's comment
raddison4x

Fred, did you even read what Larry said? He didn't say that Obama was for this deal....he said he isn't surprised that Obama's buddies are on the wrong side of this deal. Maybe put your liberal brain aside and work on your comprehension before you post.

August 26 2014 at 6:54 PM Report abuse rate up rate down
terrymuscato

We were eating at BK once a week with 2 other couples. No more.

August 26 2014 at 4:51 PM Report abuse +2 rate up rate down Reply
TEXACO OIL

Burger King's Whopper's the best. I also like Dairy Queen's $5 meal.

Way to go, Mr Buffett on the "bulldozer thing" in buying.

I'm very proud of him.

August 26 2014 at 3:45 PM Report abuse +1 rate up rate down Reply
1 reply to TEXACO OIL's comment
hoot211

When you get done your BK Whopper, I have another one for you! Perhaps you and Buffet can "bulldoze it" together.

August 26 2014 at 8:14 PM Report abuse rate up rate down Reply
Thomas Rockford

I hope Obama is watching this Burger King situation. The last thing we need is a mass-exodus of businesses to Canada (and other countries)

In an administration obstinately opposed to real growth policies, and an education system that generates workers that can barely read, the best anyone can hope for is part-time and minimum-wage jobs.... No wonder minimum wage increases are being pushed.

Taking all of these forces together, you get Obama's dream: a drop in the standard of living of the affluent accompanied, by redistribution of wealth to the Democrat-voting minimum wage employee.

Just take myself for example - I was laid off in 2010 shortly after the start of the recession. I’m highly skilled in my field (chemical engineer), yet have been bouncing around from job to job all making starting salary numbers, despite being 40 years old.

Paying my mortgage is a struggle. Paying my health insurance is worse ($375/month from Freelancer’s Union). I am forced to buy cheap bare minimum car insurance ($18/month from Insurance Panda). My daughter is forced to attend a public school that is in increasingly worse condition. Yet here I am, unable to afford a quality education for her. I can only assume it is MUCH MUCH WORSE for other people.

Now if Obama manages to avoid any significant voter-identification legislation and manages to reduce/eliminate deportations while keeping open the border, all of his dreams come true!

August 26 2014 at 3:38 PM Report abuse rate up rate down Reply
2 replies to Thomas Rockford's comment
HiBarbRayAndMeg

What a load of crap... Congress is mostly responsible for everything you just dirbbled. That echo chamber must be getting very tight.

August 26 2014 at 3:56 PM Report abuse +2 rate up rate down Reply
1 reply to HiBarbRayAndMeg's comment
gee.effwye

Hmmmmm....and you credited congress for the clinton budgets and growth?

August 26 2014 at 5:06 PM Report abuse +1 rate up rate down
janis539

you can not find a job in your field as a qualified chemical engineer but you blame President Obama and think it is just fine if corporations move their headquarters to Canada while these very businesses accept the protection of the US armed forces around the world for FREE?? These very same big businesses who get "green cards" for Chemical Engineers from India and other developing countries (most whom were educated at US Universities) and these Engineers stay here in the USA and will work for much less than you will. That is your reality and President Obama has nothing to do with it.

August 26 2014 at 6:44 PM Report abuse +1 rate up rate down Reply