NEW YORK (TheStreet) -- Shares of Burger King Worldwide (BKW) are higher by 4.60% to $33.89 in pre-market trading on Tuesday, after the fast food chain announced it has finalized an agreement to purchase the Canada-based doughnut chain Tim Hortons (THI - Get Report) .
The merger between the two companies will create the world's third largest quick service restaurant company.
The American burger restaurant will move its headquarters to Canada, as the deal is structured as a tax inversion.
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Burger King is paying over $11 billion for Tim Hortons. The merged company will have approximately $23 billion in system sales, and over 18,000 restaurants in 100 countries, both brands will be managed independently after the deal is closed.Warren Buffett's Berkshire Hathaway (BRK.B) has committed $3 billion of preferred equity to finance the merger, but will not participate in the business' management or operations, Market Watch reports. Shares of Tim Hortons are up 11.88% to $83.60 in pre-market trading today. Separately, TheStreet Ratings team rates BURGER KING WORLDWIDE INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation: "We rate BURGER KING WORLDWIDE INC (BKW) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook." Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 37.57% over the past year, a rise that has exceeded that of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- BURGER KING WORLDWIDE INC has improved earnings per share by 16.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, BURGER KING WORLDWIDE INC increased its bottom line by earning $0.66 versus $0.34 in the prior year. This year, the market expects an improvement in earnings ($0.98 versus $0.66).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Hotels, Restaurants & Leisure industry average. The net income increased by 19.4% when compared to the same quarter one year prior, going from $62.90 million to $75.10 million.
- The gross profit margin for BURGER KING WORLDWIDE INC is currently very high, coming in at 85.07%. It has increased significantly from the same period last year. Along with this, the net profit margin of 28.75% significantly outperformed against the industry average.
- Net operating cash flow has significantly increased by 71.15% to $87.80 million when compared to the same quarter last year. In addition, BURGER KING WORLDWIDE INC has also vastly surpassed the industry average cash flow growth rate of -5.65%.
- You can view the full analysis from the report here: BKW Ratings Report
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