(Reuters) – Burger King Worldwide Inc (BKW.N) plans to buy Canadian coffee and doughnut chain Tim Hortons Inc (THI.N THI.TO), the companies said on Tuesday, in a cash and stock deal to create the world’s third-largest fast food restaurant group, with sales of about US$23 billion.
The companies had said on Sunday that they were in talks, and shares of both soared on Monday.
Tim Hortons shareholders will receive $65.50 in cash and 0.8025 shares of the new company for each of their shares. Based on Monday’s close, the deal values Tim Hortons at $94.05 a share.
Tim Hortons’ New York-listed shares rose 12 percent to US$83.50 in premarket trading. Burger King was up 5 percent at US$33.96.
Burger King Executive Chairman Alex Behring and Chief Executive Officer Daniel Schwartz will hold the same positions at the combined company. Tim Hortons CEO Marc Caira will be vice chairman.
The company is to be based in Canada, its largest market.
Investors and tax experts say the main reason for Burger King to move its domicile to Canada is to avoid having to pay double taxation on profits earned abroad, as the company would have to do if it remained in the United States.
Warren Buffett‘s Berkshire Hathaway (BRKa.N) has committed US$3 billion of preferred equity to finance the deal but will have no role in managing the business, the companies said.
New York-based private equity firm 3G Capital, Burger King’s majority owner, is expected to retain about 51 percent of the combined company.
3G Capital acquired Burger King in September 2010. The control-stake deal was at the time valued at approximately US$3.3 billion.
(Reporting by Allison Martell in Toronto and Ashutosh Pandey in Bangalore; Editing by Savio D’Souza and Lisa Von Ahn)
(This story has been edited by Kirk Falconer, editor of peHUB Canada)
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