Buffett to Help Finance Burger King Tax-Saving DealNoah Buhayar and David Welch
Warren Buffett is helping to finance Burger King Worldwide Inc.’s planned takeover of Tim Hortons Inc., according to people familiar with the matter, backing a buyer that would move its headquarters to Canada where corporate taxes are lower.
Buffett’s Berkshire Hathaway Inc. would invest about $3 billion for a preferred stake, said one of the people, who asked not to be identified because there wasn’t a public announcement. Tim Hortons had a market value of about $10 billion after the stock rallied yesterday on the announcement of talks with the Miami-based hamburger chain.
Burger King is controlled by Jorge Paulo Lemann’s 3G Capital, which joined Omaha, Nebraska-based Berkshire last year in a $23.3 billion takeover of HJ Heinz Co. Buffett bought half the ketchup maker’s common stock for about $4.25 billion and invested $8 billion for preferred shares that pay a 9 percent annual dividend.
“3G does a magnificent job of running businesses,” Buffett said in May at his company’s annual meeting in Omaha. “We’re very likely to partner with them, perhaps on some things that are very large.”
Burger King rose 20 percent yesterday to $32.40, the biggest jump since the stock debuted on the New York Stock Exchange two years ago. Tim Hortons, the Oakville, Ontario-based seller of doughnuts and coffee, climbed 19 percent to C$82.03, reaching a record high.
President Barack Obama has criticized American companies that move to other nations in search of lower corporate tax bills. Between mid-June and late July, at least five large American companies announced plans to make such a shift -- known as an inversion. That includes AbbVie Inc. and Medtronic Inc.
Buffett has supported Obama’s push to increase personal income taxes for the wealthiest individuals while striking deals that reduce Berkshire’s obligations to the government. This year, his company limited taxes on more than $1 billion of gains in Graham Holdings Co. stock by swapping the shares for assets owned by the former Washington Post publisher.
“We don’t add a tip” on top of our tax bill, Buffett said at the annual meeting. “And we do certain transactions that are tax-driven.” He cited renewable-energy investments that help lower Berkshire’s taxes.
Later that month, he addressed drugmaker Pfizer Inc.’s bid for London-based AstraZeneca Plc, an offer that was subsequently withdrawn.
“I’m not saying they’re doing anything illegal at all in following the rules on inversion,” Buffett told CNBC, according to a transcript on the business news station’s website. “I would personally change that part of the law. And other people might change the part of the law about wind tax credits, but I’m not attacking Pfizer for following the U.S. tax law.”
A combination of Burger King and Tim Hortons would result in a company with about $22 billion in sales and more than 18,000 restaurants in 100 countries. The companies said in a statement that the resulting operation would have headquarters in Canada.
Burger King declined to comment, while Buffett and a representative from Tim Hortons didn’t immediately return messages seeking comment on Berkshire’s role, which was reported late yesterday by the Wall Street Journal. A deal could be announced as soon as this week, one of the people familiar with the matter said.