Seeking Alpha

Buffett to finance Burger King's acquisition of Tim Hortons

  • In a surprise twist which lands Warren Buffett in the middle of the Burger King (NYSE:BKW)-Tim Hortons (NYSE:THI) deal, Berkshire Hathaway (BRK.A, BRK.B) is now expected to provide about 25% of the financing for the merger, WSJ reports.
  • The exact structure of Buffett's participation remains unclear, but sources say he will invest in the form of preferred shares.
  • Due to deal being structured as a tax-inversion, the new move also shoves the billionaire into a heated debate over U.S. taxes.
  • THI +1.7% AH
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Comments (18)
  • Philip Marlowe
    , contributor
    Comments (1308) | Send Message
     
    It is not that surprising. Buffet is close to the Brazilian investor/PE firm that controls burger king. This was the same PE firm that purchased Hanes using mostly Buffet money.
    26 Aug 2014, 02:38 AM Reply Like
  • kadison
    , contributor
    Comments (231) | Send Message
     
    Could someone please explain to me what does tax-inversion structure mean? Thanks.
    26 Aug 2014, 03:25 AM Reply Like
  • User 17112982
    , contributor
    Comments (16) | Send Message
     
    Hey kadison, in simple terms, it basically means shifting your registered base to another country - mostly through takeovers of a company in the foreign land. This is (mostly) done to reduce the tax the company might be paying where it was previously located. The corporate tax in Canada is 15% and in the U.S it is 35%. When/If the Burger King deal goes through, they will shift their base from the U.S to Canada effectively becoming a Canadian company and paying 15% tax instead of the 35% tax.
    26 Aug 2014, 03:36 AM Reply Like
  • Lakeaffect
    , contributor
    Comments (1227) | Send Message
     
    User 1711 - Too simplistic of an explanation.
    1. Inversion is a side benefit to making a foreign acquisition, not the "mostly" reason.

     

    2. The lower tax rate applies only to earnings derived from outside the United States. Earnings from business operations in the U.S. are taxed at the U.S. rate no matter where the headquarters is domiciled.

     

    3. Inversion is good for the U.S. economy because it opens the door to repatriate funds from outside the U.S. for investment inside the U.S. Those funds, which amount to trillions accumulated over many years, have been sequestered in foreign countries due to arcane American corp. tax law.

     

    4. It is not un-patriotic, as claimed by some. The move improves competitiveness and shines the light on a silly income tax rule that has been in place for decades, hobbling American businesses when they have to compete with foreign companies.
    26 Aug 2014, 08:29 AM Reply Like
  • st_michael
    , contributor
    Comments (4) | Send Message
     
    Not exactly. Burger King will still pay the US corporate tax rate on US-based income. It would not have to pay the US rate on ex-US income. The US is the only industrialized country that taxes its resident companies' worldwide income.
    26 Aug 2014, 08:49 AM Reply Like
  • DougRk
    , contributor
    Comments (1623) | Send Message
     
    @st_m, indeed true, and shows just what a distorted world Democrat demagogues live in who claim companies are evading their patriotic taxes by inverting.
    26 Aug 2014, 07:00 PM Reply Like
  • DougRk
    , contributor
    Comments (1623) | Send Message
     
    How ironic. The Democrats' poster boy investor puts up money for a tax inversion deal.

     

    @kadison: when a US company buys or mergers with a foreign based company and takes a tax domicile in that foreign country. Effectively becoming a foreign company. Canada has a lower corporate income tax rate.
    26 Aug 2014, 03:31 AM Reply Like
  • nashman
    , contributor
    Comments (48) | Send Message
     
    Berkshire will be paying the US tax rate. The only reason why Buffett was brought in was because the Canadian government felt more comfortable with Berkshire being part of the deal. Once again, Berkshire will be paying 35 % percent (US tax Rate)
    26 Aug 2014, 07:15 AM Reply Like
  • Dale Roberts
    , contributor
    Comments (6044) | Send Message
     
    I am surprised that Warren never invested in Tim Hortons. It has most everything that he looks for. The moat for Tims is extreme, the brand is the strongest in Canada. They sell 8 out of every 10 cups of quick serve coffee.

     

    But once again, I hope this all falls through, I had no trouble selling 2/3 of my Tim's position yesterday at an outrageous price. I hope someone comes along and offers me even more for the remaining 1/3. Though I do love my Timmie's.

     

    There's no way BK understands a brand or what they would have. Slash and burn would go against how to build a sustainable brand and business.

     

    Dale
    26 Aug 2014, 06:40 AM Reply Like
  • Stock_doc
    , contributor
    Comments (267) | Send Message
     
    I though Warren and Obama were best buds. Kind of a slap in the face for the president.
    26 Aug 2014, 07:40 AM Reply Like
  • chopchop0
    , contributor
    Comments (4208) | Send Message
     
    well overdue IMO. Obama needs to partner with the GOP and fix the corporate tax code, period It encourages these shenanigans like inversions and lets other countries benefit
    26 Aug 2014, 08:26 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (9997) | Send Message
     
    Obama and the GOP will partner on nothing.
    26 Aug 2014, 09:31 AM Reply Like
  • rube123
    , contributor
    Comments (1887) | Send Message
     
    "I though Warren and Obama were best buds"

     

    believe what you see , not what you hear , Buffett is a business man , and a very shrewd one , that has a unique ability to be able to see ahead of the pack ,which makes you love that (NYSE:BRK.B)

     

    about mid way down
    " Berkshire has structured its portion of the deal so that it gets compensated for more than $50 million in higher taxes it expects to pay as a U.S. financier, the person familiar with the matter said. In other words, the combined Burger King-Tim Hortons will help subsidize Berkshire’s higher tax bill"
    http://on.wsj.com/1mZZWtv
    28 Aug 2014, 08:14 PM Reply Like
  • dealraker
    , contributor
    Comments (857) | Send Message
     
    Welch took GE to India and China which eventually cut the tax rate in half even prior to the massive financial losses. Destroyed the business too along the way. Great "conservative" man who got nearly a billion in compensation for his interesting use of accounting. Buffett's Berkshire pays their standard 35% and keeps nearly all 300,000 plus employees in the US.

     

    Again, again, and again the perfectly ignorant posters can't figure out who is good or bad for our country.
    26 Aug 2014, 09:03 AM Reply Like
  • richin10
    , contributor
    Comments (87) | Send Message
     
    yeah - right

     

    http://nws.mx/YWdeSg

     

    Just bing "buffett tax litigation"
    26 Aug 2014, 09:18 AM Reply Like
  • DougRk
    , contributor
    Comments (1623) | Send Message
     
    @deal, I don't know the answer to this, but it came to mind when reading your comment about Buffet's businesses. Are they relocatable? Geico, the railroad, insurance, etc. Industrial manufacturing is a different beast.

     

    My general take is this... obviously we all want US-based manufacturing and jobs. In this fix we're in, is it better to blame businesses for leaving for lower costs, or blame the Democrat party for 50 years of regulation and taxation that have made the US so inhospitable a place to make things?
    2 Sep 2014, 05:28 PM Reply Like
  • psychological-dividends
    , contributor
    Comments (816) | Send Message
     
    I heard it was 3B in preferred stock. I don't know what the coupon is.

     

    As mentioned earlier not surprising, because Buffett is close to 3G.
    26 Aug 2014, 11:14 AM Reply Like
  • BG-NE
    , contributor
    Comments (3) | Send Message
     
    9%?
    2 Sep 2014, 09:11 AM Reply Like
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