Burger King eyes up Tim Hortons

Burger King Worldwide plans to buy Canadian coffee and doughnut chain Tim Hortons in a C$12.64 billion (€8.74 billion) cash-and-stock deal that would create the world's third-largest fast-food restaurant group.

With roughly $23 billion in combined annual sales and more than 18,000 restaurants in 100 countries, the new entity would have a vast global footprint and huge growth potential, the companies said in a joint statement yesterday.

The deal is not expected to run into any antitrust hurdles, given the different fast-food segments the two companies serve, but it is expected to generate some anger in the United States because of Burger King’s plan to move the combined entity to Canada. The companies had confirmed on Sunday they were in merger talks and shares of both soared on Monday.

The deal values Tim Hortons at C$94.05 a share, a 37 percent premium to Friday’s close of C$68.78 in Toronto.

Tim Hortons’ Toronto-listed shares were up 8.8 per cent at C$89.29 in morning trading, while Burger King fell 2.5 per cent to $31.58 in New York.

"I think C$94 is pretty rich," said David Baskin, president of Baskin Financial Services, which controls about 180,000 shares in Tim Hortons. "We were hoping for C$90, but at C$94, I can't imagine anybody not tendering." Billionaire investor Warren Buffett's Berkshire Hathaway has committed $3 billion of preferred equity to finance the deal but will have no role in managing the business, the companies said. 3G Capital, a New York-based investment firm with Brazilian roots, owns some 70 per cent of Burger King, making a shareholder vote on the deal unnecessary. 3G is set to hold about 51 percent of the combined company.

Investors and tax experts say the main reason for Burger King to move its domicile to Canada, its largest market, is to avoid having to pay double taxation on profits earned abroad, which it would probably be subject to if it remains in the US. – (Reuters)