TORONTO—Miami-based Burger King is buying Canada’s iconic coffee chain Tim Hortons for about US$11-billion in a deal that will boost both companies’ operations but allow them to continue operating as stand-alone brands.
“As an independent brand within the new company, this transaction will enable us to move more quickly and efficiently to bring Tim Hortons iconic Canadian brand to a new global customer base,” Tim Hortons president and CEO Marc Caira said in a statement on Tuesday.
“At the same time, our customers, employees, franchisees and fellow Canadians can all rest assured that Tim Hortons will still be Tim Hortons following this transaction, including our core values, employee and franchisee relationships, community support and fresh coffee.”
The deal comes just over a day after both sides confirmed they were in talks, a possibility which sent their stock surging and created a flurry of speculation about what the combination may mean for the burger and doughnut chains.
The deal announced Tuesday will create the world’s third-largest quick service restaurant company, with about $23 billion in sales and more than 18,000 restaurants in 100 countries.
The corporate headquarters of the new global company will be based in Canada, which could help Burger King lower its U.S. tax bill.
The tax benefit was one of the major reasons cited by analysts ahead of the deal, as well as the fact that the combination will give Tim Hortons a better platform to launch into the U.S. and globally, something Tim Hortons has been struggling to achieve on its own.
The company has been owned by a large U.S. chain before, when it was purchased by Wendy’s International Inc. in 1995. While it was spun-off from Wendy’s in 2006, this type of ownership structure, and the benefits that come with it, is familair to Tim Hortons.
But no major changes are expected to the actual brands, and Oakville, Ont., will remain the headquarters of Tim Hortons and Miami will remain the home base of Burger King.
Under the terms of the transaction, Burger King will pay C$65.50 in cash and 0.8025 common shares of the new company for each Tim Hortons’ share. This represents total value per Tim Hortons share of C$94.05 Canadian, based on Burger King’s closing stock price on Monday. Tim Hortons shareholders can choose either all-cash or all stock in the new company.
Analysts had pegged the possible share value of the deal between $85 and $95.
Private equity firm 3G Capital will own about 51 per cent of the new company, with Alex Behring, executive chairman of Burger King and managing partner at 3G Capital, leading the new global company as executive chairman and director.
Caira will be appointed vice-chairman and a director, focused on strategy and global business development, and continue as Tim Hortons’s CEO during the transition.
Daniel Schwartz, CEO of Burger King, will become Group CEO of the new company, with overall day-to-day management and operational accountability. The new company’s board will include the current eight Burger King directors and three directors to be appointed by Tim Hortons, including Caira.