The
proposed $12.5 billion merger of Tim Hortons and Burger King began in early
March with a phone call to Warren Buffett.
proposed $12.5 billion merger of Tim Hortons and Burger King began in early
March with a phone call to Warren Buffett.
Alexandre
Behring, chairman of Burger King and managing partner of the burger chain’s
majority owner, 3G Capital, called Buffett to see if the American billionaire
would be willing to finance the transaction.
Behring, chairman of Burger King and managing partner of the burger chain’s
majority owner, 3G Capital, called Buffett to see if the American billionaire
would be willing to finance the transaction.
Buffett,
who had previously helped 3G Capital, a Brazilian investment firm, buy H.J.
Heinz Company in 2013, said yes, according to regulatory filings jointly
submitted by the companies on Tuesday as part of the process of winning
shareholders’ approval of the deal.
who had previously helped 3G Capital, a Brazilian investment firm, buy H.J.
Heinz Company in 2013, said yes, according to regulatory filings jointly
submitted by the companies on Tuesday as part of the process of winning
shareholders’ approval of the deal.
Tim
Hortons board of directors was not so quick to agree. The coffee and doughnut
chain had just embarked on its own multi-year strategic plan to boost sales and
profits under its relatively new chief executive officer Marc Caira.
Hortons board of directors was not so quick to agree. The coffee and doughnut
chain had just embarked on its own multi-year strategic plan to boost sales and
profits under its relatively new chief executive officer Marc Caira.
NEW YORK — Billionaire investor Warren
Buffett, who agreed to help finance Burger King Worldwide Inc.’s planned
takeover of coffee-and-doughnut chain Tim Hortons Inc., said the deal wasn’t
motivated by taxes.
Buffett, who agreed to help finance Burger King Worldwide Inc.’s planned
takeover of coffee-and-doughnut chain Tim Hortons Inc., said the deal wasn’t
motivated by taxes.
“The highest amount of federal taxes that
Burger King has paid in any of the last three years has been $30 million
(U.S.),” Buffett said Thursday on MSNBC. That’s a fraction of the more than $11
billion (U.S.) that the Miami-based fast-food chain agreed to pay for Oakville,
Ontario-based Tim Hortons. The combined company will be based in Canada, which
has a lower federal tax rate than the United States.
Burger King has paid in any of the last three years has been $30 million
(U.S.),” Buffett said Thursday on MSNBC. That’s a fraction of the more than $11
billion (U.S.) that the Miami-based fast-food chain agreed to pay for Oakville,
Ontario-based Tim Hortons. The combined company will be based in Canada, which
has a lower federal tax rate than the United States.
The Obama administration and Congress have
been weighing how to dissuade U.S. businesses from moving to other nations in
search of lower corporate tax bills. Between mid-June and late July, at least
five large American companies announced plans to make such a shift, known as an
inversion. That includes AbbVie Inc. and Medtronic Inc.
been weighing how to dissuade U.S. businesses from moving to other nations in
search of lower corporate tax bills. Between mid-June and late July, at least
five large American companies announced plans to make such a shift, known as an
inversion. That includes AbbVie Inc. and Medtronic Inc.
Buffett said that while the Burger King
deal fits the definition of an inversion, it should be distinguished from
transactions in which companies shift valuable intellectual property to other
nations. Inversions can also limit obligations to the U.S. on profits earned
abroad.
deal fits the definition of an inversion, it should be distinguished from
transactions in which companies shift valuable intellectual property to other
nations. Inversions can also limit obligations to the U.S. on profits earned
abroad.
“There isn’t a whole lot of intellectual
property to transfer with hamburgers,” Buffett said. “This is not a case of
trapped cash, it’s not a case of intellectual property. It’s a case of the
larger company being in Canada.”
property to transfer with hamburgers,” Buffett said. “This is not a case of
trapped cash, it’s not a case of intellectual property. It’s a case of the
larger company being in Canada.”
Those assertions could be disputed. While
Canada will be the combined company’s largest market and Tim Hortons generates
more revenue, the U.S. company had a bigger market capitalization before the businesses
announced they were in merger talks. Burger King’s controlling shareholder, 3G
Capital, will also have a majority stake in the combined company.
Canada will be the combined company’s largest market and Tim Hortons generates
more revenue, the U.S. company had a bigger market capitalization before the businesses
announced they were in merger talks. Burger King’s controlling shareholder, 3G
Capital, will also have a majority stake in the combined company.
Mimicking a practice that’s become routine
among pharmaceutical and technology firms, some food-service companies also
have shifted profits to low-tax nations by transferring intangible assets, such
as brand names, to subsidiaries in those countries and then charging royalties
for their use.
among pharmaceutical and technology firms, some food-service companies also
have shifted profits to low-tax nations by transferring intangible assets, such
as brand names, to subsidiaries in those countries and then charging royalties
for their use.
Getting a foreign address would increase
the savings generated by such a maneuver, and it also might allow Burger King
to attempt the strategy in the U.S., currently its biggest market. Burger King
already reduces its taxes in countries including Germany through payments to a
Swiss affiliate that owns brand rights, Reuters reported this month, citing a
2012 company statement to the news service.
the savings generated by such a maneuver, and it also might allow Burger King
to attempt the strategy in the U.S., currently its biggest market. Burger King
already reduces its taxes in countries including Germany through payments to a
Swiss affiliate that owns brand rights, Reuters reported this month, citing a
2012 company statement to the news service.
Buffett’s Berkshire Hathaway Inc., based
in Omaha, Nebraska, agreed to invest $3 billion (U.S.) for a preferred stake in
the new company paying an annual dividend of 9 per cent.
in Omaha, Nebraska, agreed to invest $3 billion (U.S.) for a preferred stake in
the new company paying an annual dividend of 9 per cent.
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