How Warren Buffett Is Helping Burger King and Tim Horton Merger

Warren Buffett
Source: White House Photo by Pete Souza
A conference call is scheduled for 11:30 a.m. ET Tuesday, at which the CEOs of Burger King Worldwide Inc. (NYSE: BKW) and Tim Hortons Inc. (NYSE: THI) will discuss the agreement that will have Burger King paying about $59.72 (CDN$65.50) in cash and 0.8025 in stock for the Canada-based quick-service restaurant (QSR) chain. Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A) have committed $3 billion in preferred equity financing to help create a new company worth about $23 billion.

The merger is widely described as a “tax inversion” under which the combined company’s headquarters would move to Canada, thereby avoiding higher U.S. taxes on business revenues. Buffett, a long-time advocate for having wealthy individuals pay their fair share of taxes, may be about to stir up a firestorm of negative comments for his contribution to Burger King’s scamper across the border.

Burger King is controlled by 3G Capital, the same firm that partnered with Buffett to acquire H.J. Heinz for $28 billion in 2013. 3G Capital issued about 16% of Burger King’s shares in an IPO in June of 2012, about three-quarters of which were picked up William Ackman and Pershing Square Capital Management.

A report at CNBC cites sources who said that Berkshire Hathaway would pay a full share of U.S. taxes because the combined company would be distributing dividends in the United States. Canada’s corporate tax rate is 26%, compared with the U.S. rate of 35%.

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