NEW YORK (TheStreet) -- Warren Buffett, whose Berkshire Hathaway (BRK.A) - Get Report is financing part of Burger King's (BKW) $11 billion acquisition of Tim Hortons (THI) , said the burger chain's relocation to Canada was intended to appease Canadian regulators, not to skirt U.S. taxes.
In a CNBC interview, Buffett argued that Burger King's agreement to move its headquarters was a concession to the Canadian Trade Commissioner Service, given Tim Hortons' prominence in Canada and its profitability. Buffett noted that Tim Hortons is almost twice as profitable as Burger King, adding that Berkshire Hathaway has made agreements to invest in Canada when making acquisitions in the country.
Buffett's support of the deal, which was not a surprise, comes as more companies are relocating outside the U.S. to avoid high corporate tax rates, a process known as inversion. The practice has come under criticism in media and political circles in recent months. Still, Buffett's comments may shed new light on how Burger King's owners, Brazilian private-equity firm
, approach large cross-border deals.
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Berkshire Hathaway is providing $3 billion in financing to Burger King as it works to buy Tim Hortons. The financing agreement, which was done through a preferred stock investment that will carry a 9% dividend yield, is similar to the structure of an $8 billion preferred stock deal Berkshire made with 3G Capital when it acquired ketchup-maker Heinz in 2013.
Berkshire Hathaway has turned into a key financier for Lemann and his top lieutenants as they've expanded out of Brazil, buying some of the most prominent consumer brands in North America and Europe including InBev, Anheuser Busch and Heinz.
Buffett's comments on Thursday morning may provide new insight into the deal-making tact of Lemann and 3G Capital as they have quietly become global power brokers. The comments also counter some criticism of Burger King's planned move to Canada.
-- Written by Antoine Gara in New York