Burger King acquires Canadian coffee chain giant Buffett to raise $3 billion

On Aug. 25, US fast food giant BurgerKingWorldwideInc;NYSE:BKW confirmed that it was in talks to buy TimHortons, a Canadian coffee and doughnut chain, and was interested in moving its headquarters to Canada to reduce tax expenses.

According to the statements of the two companies, the two sides will form a new company after the merger and retain two original brands, which will form the third largest catering company in the world.

Last night, the Daily Business News learned that Tim Horton had reached a final merger agreement with Burger King, a deal that could be worth about $10 billion (61.5 billion yuan). Earlier, the news that the "god of shares" Buffett would provide financing support for Burger King's acquisition of Tim Horton was also confirmed. Burger King's controlling shareholder 3G owns 51 per cent of the combined company, with Berkshire Hathaway, owned by Mr Buffett, providing $3 billion in financing. With his position in the investment community, Buffett's participation increased the attention of the deal. Benefiting from the acquisition news, the shares of Burger King and Tim Horton soared nearly 20% on the 25th.

Acquisition leads to tax avoidance dispute

Burger King and Tim Horton said in a statement that they intend to form a new company with a market capitalization of about $18 billion. In terms of equity ratio, Burger King's controlling shareholder 3GCapital will hold a majority stake in the new company, while the rest will be held by Tim Horton and existing Burger King shareholders.

Burger King has previously said that once the merger contract is concluded, Burger King will move its headquarters from the United States to Canada and set up a new listed company. Canada will become the biggest market for the new company. However, Burger King and Tim Horton will continue to operate under their respective brands.

If the deal is finally completed, the newly formed company will become the third largest fast food chain group in the world. The company's annual turnover will reach US $22 billion and has more than 18000 chain stores in more than 100 countries around the world.

However, the Daily Business News learned that the deal has caused a lot of controversy, and many people believe that Burger King's biggest purpose of moving out of the United States is to avoid taxes. The tax rate in Canada is much lower than that in the United States.

In fact, this practice is also known as taxinversion. The so-called tax inversion means that after one American company acquires another company headquartered in a low-tax country, the two companies rebuild a new company in order to reduce corporate tax.

At present, many American companies are making acquisitions in this way in the hope of legally avoiding taxes. For example, the acquisition of Shire, a British drug company, by Aberdeen, an American health-care company, is one example.

M & An intensifies in food industry

According to foreign media reports, Buffett, the "god of shares", will provide financing support for the merger and acquisition of Burger King. As the head of Berkshire Hathaway, Buffett is likely to participate in acquisitions by investing in preferred stock. Berkshire Hathaway provided $3 billion in financing for the deal, it was reported last night.

The reporter learned that just last year, Berkshire teamed up with Burger King controlling shareholder 3G Capital to buy ketchup maker Heinz for about $28 billion, making it one of the largest mergers and acquisitions in the food and beverage industry. This participation in the merger and acquisition once again shows Buffett's enthusiasm for the food industry. Before that, Buffett owned Coca-Cola for a long time. Recent position reports show that Buffett is also involved in investing in Archer Daniels Midland (ADM), a food additive and animal feed maker, and increasing his holdings in Mondelez, a spin-off from Kraft Foods.

Wang Haijiao, senior investment manager of Shanghai Gaotejia Investment Management Co., Ltd., said in an interview with the Daily Economic News that Buffett likes to invest in industries with steady growth and demand, as well as large companies supported by strong demand. the food industry is just such an industry.

With the upgrading of domestic consumption, the food industry has been paid more and more attention by investment groups. In China, take Fosun Group, which has a strong investment, as an example, which has been strengthening its investment in the consumer sector in recent years. In July, the company announced that it would take a 20 per cent stake in Spain's Osborne group. Prior to this, Fosun has successively invested in consumer brands such as Vig Cake House, Malaysian catering chain Food Secret, Sanyuan shares, Old Mother's Uncle, tasteless Duck neck and Harvest Day.

Wang Haijiao believes that with the intensification of M & An integration in the consumer goods industry, there are still opportunities for some well-done segments, such as those that have a certain market size but have not yet been integrated. "now many funds are investing, generally speaking, the upgrading of domestic consumption brings consumer demand, and many small enterprises have the demand for mergers and acquisitions, which also brings opportunities to leading enterprises and capital."