Burger King In Talks of Acquiring Tim Hortons; Warren Buffet Backing Deal
Burger King, the famous fast food chain, is reportedly in advanced talks to buy Tim Hortons - the Canadian coffee and donut joint. Warren Buffet, the founder of Berkshire Hathaway is also backing the merger deal.
The acquisition will allow Burger King to take advantage of Tim Hortons' market share. The deal would also help Burger King fight off the stiff competition it has been facing from rivals like McDonalds and KFC.
The merger would be the third-largest food-chain combination with a stock value of about $18 billion, BBC reports.
The merger calls for the creation of a new company which would be headquartered in Canada because corporate taxes are relatively lower in the country. Burger King's majority shareholder, 3G, will control the newly spun off company.
People familiar with the matter told The Wall Street Journal that the deal will be finalized and announced in a day or two. The transaction is pegged at around $10 billion.
Warren Buffet's Berkshire Hathaway will be investing in the deal through preferred shares and according to some insiders, will provide 25 percent of the financing.
Experts say that while Burger King will definitely profit from the transaction, it is unclear what Tim Hortons will gain from the merger, especially because the Canadian coffee chain has a strong market hold.
"Properly managed, there is a huge upside to the proposed merger," Ken Wong, professor of business at Queen's University told The Star. "It isn't a slam dunk, but it has all the makings. Beyond the obvious benefits of scale and tax savings, the deal offers some interesting possibilities . . . but I don't think you'll see Tim Hortons selling fries and burgers," he added.
"We believe that the magnitude of potential synergies is limited. The two companies will operate as separate brands and we believe synergies will largely be limited to shared corporate services and some procurement savings," Peter Sklar, analyst at BMO Capitals told the publication.
