OAKVILLE, ONTARIO AND MIAMI — Burger King Worldwide Inc. (NYSE: BKW) has entered into a definitive agreement to buy Canadian restaurant chain Tim Hortons Inc. (NYSE: THI) for a reported $11.4 billion. According to a release, this merger will create the third-largest quick-service restaurant company in the world.
The combined company will have more than 18,000 restaurants in 100 countries, and approximately $23 billion in annual sales.
The new company will be based in Canada, where the majority of Tim Hortons’ stores are located.
Under the terms of the transaction, which was unanimously approved by the board of directors of both companies, Tim Hortons shareholders will receive C$65.50 ($59.79 USD) in cash and 0.80 common shares of the new company per Tim Hortons share.
Based on Burger King’s closing stock price as of Aug. 25, 2014, this represents total value per Tim Hortons share of C$94.05 ($85.78 USD).
Alex Behring, executive chairman of Burger King and managing partner at 3G Capital, the Brazil-based investment firm that controls Burger King, will lead the new global company as executive chairman and director.
“By bringing together our two iconic companies under common ownership, we are creating a global quick-service restaurant powerhouse,” says Behring. “Our combined size, international footprint and industry-leading growth trajectory will deliver superb value and opportunity for both Burger King and Tim Hortons shareholders, our dedicated employees, strong franchisees and partners.”
Because 3G Capital already owns approximately 70 percent of the shares of Burger King and has committed to vote in favor of the combination, no shareholder vote is required of Burger King shareholders. 3G Capital will own approximately 51 percent of the new company.
Following the closing of the transaction, each brand will be managed independently and maintain its respective headquarters—Tim Hortons in Oakville, Ontario, and Burger King in Miami.
Burger King has obtained commitments for $12.5 billion of financing to fund the cash portion of the transaction, including commitments for a $9.5 billion debt-financing package led by JP Morgan and Wells Fargo. Berkshire Hathaway has also committed $3 billion of preferred equity financing.
Tim Hortons is one of the largest publicly traded restaurant chains in North America and the largest in Canada. As of June 29, 2014, Tim Hortons had 4,546 restaurants, including 3,630 in Canada and 866 in the United States.
Tim Hortons’ stock price closed at $74.72 per share on Monday, Aug. 25, up from $56.05 per share a year ago.
Burger King is the second-largest fast food hamburger chain in the world. Burger King operates in approximately 14,000 locations, serving more than 11 million guests daily in 98 countries and territories worldwide. Nearly 100 percent of Burger King restaurants are owned and operated by independent franchisees.
Burger King’s stock price closed at $32.40 per share on Monday, Aug. 25, up from $27.11 per share a year ago.
—Scott Reid