This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Burger King Wraps Up $11B Tim Hortons Deal

This story has been updated from 11:34 am EDT with comments from a conference call with reporters.

NEW YORK ( The Deal) -- Burger King Worldwide (BKW)  confirmed Tuesday that it agreed to acquire Tim Hortons (THI)  in an $11 billion merger structured as a tax inversion.

The announcement comes one day after the two restaurant chains confirmed they were in talks about a deal.

See what TheStreet's Jim Cramer has to say about Tim Hortons:

WATCH: More market update videos on TheStreet TV | More videos from Jim Cramer

The deal puts more pressure on McDonald's (MCD)  breakfast program, with Burger King getting one of Canada's largest coffee and breakfast chain operators. The new combined company will become the world's third-largest quick service operator behind McDonald's and Subway operator Doctor's Associates in terms of number of stores.

Oakville, Ontario-based Tim Hortons was once controlled by Burger King rival Wendy's (WEN) .

Tim Hortons shareholders have the option to receive C$65.50 in cash and 0.8025 shares of the new company for each share, or either C$88.50 in cash or 3.0879 shares of the new company.

Miami-based Burger King has received a $12.5 billion commitment from JP Morgan Chase & Co. and Wells Fargo Bank NA to fund the cash portion of the deal. Warren Buffet's Berkshire Hathaway Inc. has also committed $3 billion in financing.

3G Capital, which owned a 70% stake in Burger King before the deal was announced, will own a 51% stake in the new combined company by converting its shares into equity. The private-equity firm took Burger King private in 2010 for $4 billion then took it public again in 2012.

The new combined will operate more than 18,000 restaurants worldwide, across 100 countries and will have about $23 billion in combined sales.

"We are excited to build on this progress as we continue to expand Burger King around the world and look forward to working with and learning from Tim Hortons as we together create the world's leading global restaurant business," said Burger King CEO Daniel Schwartz in a statement.

"As an independent brand within the new company, this transaction will enable us to move more quickly and efficiently to bring Tim Hortons iconic Canadian brand to a new global customer base," added Tim Hortons CEO Marc Caira in a statement.

What this transaction does is "give us the chance to share with the world what Canadians already know and love," Caira said on a conference call with reporters on Tuesday. "We will be able to leverage a global network and learn from their experience" in building a strong global QSR brand.

"We are very confident that we can grow much quicker in this ... battle called the U.S.," Caira said later on the call.

Looking toward 3G Capital's investment in Heinz and Anheuser-Busch InBev, "these are the examples we hope to follow with this transaction," Caira noted. As bottles of Heinz ketchup and InBev's beer are household names, putting Tim Horton's coffee and boxes of doughnuts "in the hands of more consumers around the world -- that is what today's announcement is all about," he said. "It's about growth."

There was no shortage of questions about the tax implications of the deal from reporters following prepared remarks. Executives repeated that while the holding company would be based in Canada -- the combined company's largest market -- Burger King, based in Miami, would continue paying U.S. taxes.

"We don't expect there to be meaningful tax savings, nor we do we expect there to be change to our tax rate," said Burger King CEO Daniel Schwartz. 

Schwartz will lead the new combined company and Caira will become executive chairman, while gaining a board seat. Even though the two brands will continue to operate independently out of their respective headquarters, they are going to call Canada their new home.

Lazard's Antonio Weiss and Alex Hecker, J.P. Morgan Securities Inc.'s Ben Bernstein and Wells Fargo Securities LLC provided Burger King with financial advice.

Kirkland & Ellis LLP's Stephen Fraidin, William Sorabella, David Feirstein, Dean Shulman, Jay Ptashek, Joshua Korff, Michael Kim, Mike Carew, Laura Sullivan, Andrew Glickman, Dylan Hanson, Elizabeth Freechack and Jessica Sublera along with Davies Ward Phillips & Vineberg LLP's Patricia Olasker, Raj Juneja, Steven Harris, Jason Galbraith, George Addy and Charles Tingley and Paul, Weiss, Rifkind, Wharton & Garrison LLP's Jeffrey Samuels, Alyssa Wolpin and Robert Killip provided Burger King with legal counsel.

Citigroup Inc.'s Leon Kalvaria and RBC Capital Markets LLC's Peter Buzzi and Benjamin Mandell advised Tim Hortons.

Wachtell, Lipton, Rosen & Katz's Adam Emmerich and Osler, Hoskin & Harcourt LLP's Clay Horner, Douglas Bryce, Michelle Lally, Patrick Marley, Laurie Barett,Donald Gilchrist and John Valley advised Tim Hortons.

Munger Tolles & Olson LLP's Robert Denham and Mary Ann Todd represented Berkshire.

Since 3G Capital has already voted in favor of the merger, it does not require additional Burger King shareholder approval, but it still must go through Tim Horton shareholders and regulators.

Burger King shares were down 3% to $31.42 on Tuesday, with its market capitalization near $11.05 billion. Tim Hortons shares were trading 8.8% higher, to $81.30, with its market cap near $10.8 billion.

-- David Marcus from The Deal and Laurie Kulikowski from TheStreet contributed to this report.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BKW $35.50 0.00%
THI $35.93 -2.70%
AAPL $111.60 0.00%
FB $94.26 0.00%
GOOG $646.67 0.00%


Chart of I:DJI
DOW 17,131.86 +47.37 0.28%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,838.6430 +8.1730 0.17%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs