Burger King (NYSE:BKW) agreed to purchase Canadian coffee and doughnut chain Tim Hortons for $11.4 billion, creating the third-largest fast-food chain in the world. The company also announced that the new headquarters would be located in Canada.
Berkshire Hathaway, run by CEO Warren Buffet, has contributed $3 billion of preferred equity financing to the transaction, reported Forbes. Berkshire will function simply as a financing source and will not participate in management or operation of the company after the merger.
The combined food chains, which bring in $23 billion in annual revenues, will both be able to expand their international footprints.
Brazilian private equity firm 3G Capital, which acquired Burger King in 2010, will retain a 51 percent majority stake in the new company. However, the brands will remain independent.
The movement of headquarters to Canada could be greatly advantageous to the brand. Canada's corporate tax rate is 26.5 percent, compared with 40 percent in the United States. The company's decision, known as tax inversion, drew quick condemnation from some lawmakers, with increasing pressure on Congress and the Obama Administration to act, reported the Wall Street Journal.
"Burger King is a household name, and this will focus the public's attention on this issue in a way that earlier inversions did not," Rep. Chris Van Hollen (D-Md.), the top Democrat on the House Budget Committee told the Wall Street Journal. He predicted that the majority-Democrat Senate would try to pass anti-inversion legislation soon, meaning Democrats would continue to push for a similar vote in the GOP-run House.
Many Republicans also want tax inversion laws to change, but in a way that makes the United States more attractive for big businesses.
This news comes only weeks after Walgreens purchased the remaining shares of European brand Alliance Boots and contemplated moving its headquarters to Switzerland, ultimately deciding to keep the United States as its home base.
-See this Forbes article
-See this Wall Street Journal article
-See this Bloomberg article
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