The two chains will be run separately; the parent will be based in Canada.
Burger King Worldwide agreed Tuesday to buy the Canadian restaurant chain Tim Hortons for about $11.4 billion, creating one of the biggest fast-food operations in the world — with a little help from Warren Buffett.
As part of the transaction, however, the U.S. burger giant will move its home to Canada, where the combined company’s biggest market will be.
Under the terms of the deal, Burger King will pay 65.50 Canadian dollars in cash and 0.8025 of one of its shares for each Tim Hortons share. That amounts to about 94.05 Canadian dollars a share, or $85.78 a share, based on Burger King’s closing price Monday.
The combined company will have 18,000 restaurants in 100 countries, and $23 billion in annual revenue.
But while Burger King will relocate north of the border, raising concerns about yet another company moving abroad to reduce its tax bill, the switch in corporate nationality appears more aimed at appeasing Canadian regulators wary of a foreign company buying a national icon like Tim Hortons. In fact, Burger King is expected to save a little bit on taxes through the so-called corporate inversion, rather than enjoy a huge reduction, according to people involved in the transaction.
The two companies emphasized that each would continue to be run from its current home base, with Tim Hortons operated out of Oakville, Ontario, and Burger King from Miami. Neither is altering their franchisee agreements or business models.
3G Capital, the Brazil-based investment firm that controls Burger King, will retain majority control of the combined company, with a 51 percent stake. Alex Behring, 3G’s managing partner, will be executive chairman at the merged company.
Help financing the transaction will come from one of 3G’s biggest admirers, Buffett. Berkshire Hathaway, run by Buffett, will buy $3 billion worth of preferred shares in the new company. Terms were not disclosed.