Burger King buys Tim Hortons in $12.5B deal
By Jonathan Zettel, assistant editor
OAKVILLE, ON and MIAMI, FL—Tim Hortons agreed to a $12.5-billion deal to be taken over by quick-service giant Burger King and its majority owner, Brazilian-based private equity firm 3G Capital, on Aug. 26.
According to the companies, the deal had been in the works for months and will form a new global company based in Canada where the majority of the combined business is located.
Burger King will keep its Miami, FL, headquarters and Tim Hortons will maintain its offices in Oakville, ON.
In a teleconference call, Tim Hortons president and chief executive officer Marc Caira told members of the press the deal would not impact the quality or kind of service Canadians have come to expect.
“Tim Hortons will still be Tim Hortons,” Caira said. “We will still be the company of the timbit and of the double double.”
According to a joint statement, both brands will operate independently with no crossover plans for their core products: Tim Hortons coffee will not be sold in Burger King units and Whoppers will not be sold at Tim Hortons.
Alex Behring, executive chairman of Burger King and managing partner at 3G Capital, which acquired Burger King in 2010, denied initial reports the move was to reduce corporate taxes.
“This is not a tax-driven deal. This transaction is fundamentally about growth and the focus is on creating value to accelerate international expansion for both brands,” Behring said.
Burger King chief executive officer, 34-year-old Daniel Schwartz, confirmed the deal was not tax-driven.
“Burger King has and will continue to pay taxes in the United States and Tim Hortons will continue to pay taxes in Canada,” he said. “We don’t expect there to be meaningful tax savings.”
Schwartz took his position at the helm of Burger King a year ago, in which time the company has slashed operating costs by nearly 50 per cent, sold the company’s corporate jet and cancelled a lavish annual party.
According to a joint statement, Behring will serve as the new company’s executive chairman and director, Caira will take on the role of vice-chairman and director, with a focus on overall strategy and global development, and Schwartz will become the chief executive officer of the new company, responsible for day-to-day management.
Caira said “it would be a fair conclusion” to say the deal was initiated by Burger King.
In February, under Caira’s leadership, Tim Hortons unveiled a five-year strategic plan in which the U.S. market was called a “must-win battle.”
According to Caira, the takeover will allow Tim Hortons to leverage Burger King’s “global network and learn from their experience of growth.”
During the year, Tim Hortons has already been making changes to the brand. In mid-August, Tim Hortons unveiled a dark roast blend, marking the first addition to the company’s regular coffee lineup since its inception 50 years ago. “We know our guests want variety and choice when it comes to our coffee and we know more and more people are choosing dark blends in addition to medium blends so there is no more one-size-fits-all mentality,” Caira said at the dark roast launch which featured a performance by Canadian musician Jann Arden. “It’s all about choice—we knew the status quo had to change.”
At the time of press, the location of the Canadian global headquarters and the name of the new company have not been announced.
Tim Hortons shareholders will receive $65.50 in cash and 0.8025 shares of the new company per Tim Hortons’ share.
The deal is still subject to the approval of Canada’s foreign investment agency, Tim Hortons shareholders and U.S. antitrust authorities and is expected to close late 2014 or early next year.
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