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Burger King close to finalizing Tim Hortons acquisition

Burger King close to finalizing Tim Hortons acquisition

Canadian approval means merger could be completed by next week

Burger King Worldwide Inc. received a key approval from a Canadian regulator this week for its planned acquisition of Tim Hortons Inc., paving the way for the deal to be finalized.

Tim Hortons shareholders are expected to vote on the $11 billion deal at a special meeting Tuesday, the last hurdle before the deal is finalized. The companies said in a joint statement that the acquisition should be complete by Dec. 12.

On Thursday, Canada’s Industry Minister James Moore said he approved the deal. As part of that approval, Burger King made numerous commitments designed to assuage concerns about Tim Hortons’ brand identity and the company’s staffing levels in Canada, as well as the chain’s pace of international development.

“Our government is pleased to see companies like Burger King investing in Canada’s economy and looking to benefit from our low taxes and open markets,” Moore said in a statement.

The acquisition is expected to create a global behemoth with systemwide sales of $23 billion a year and 18,000 restaurants worldwide, which would make it the world’s third-largest restaurant operator after McDonald’s Corp. and Yum! Brands Inc.

Investment firm 3G Capital, which owns a controlling interest in Burger King and which will own a controlling interest in the combined company once the deal is finalized, targeted Tim Hortons in part for the potential it sees to expand the chain internationally. Tim Hortons has 3,600 units in Canada, but less than 900 locations in the U.S. and less than 300 outlets in other countries.

As part of its deal to win the approval of Canada’s Industry Minister, Burger King would accelerate development in the U.S. and internationally “at a significantly greater pace than currently planned.”

In addition, Burger King agreed to keep the company’s headquarters in Oakville, Ontario, and to maintain “significant employment levels” at that facility. Canadians also should comprise at least 50 percent of the combined company’s board of directors, and Tim Hortons should be managed as a distinct brand “without co-branding of any locations in Canada or the United States.”

Burger King also agreed to maintain its franchisee rent and royalty structure at their current levels for five years, and to maintain Tim Hortons’ current charitable work across Canada.

Burger King’s purchase of Tim Hortons received considerable attention in the U.S. due to potential tax benefits of keeping the combined company’s headquarters in Canada. The combined company’s headquarters will be in a Toronto suburb, while Burger King’s headquarters will remain in Miami. There was considerable concern in Canada over Tim Hortons being acquired by a U.S. firm, as the brand is considered an institution in its home country.

The vote next week earned the endorsement of both major proxy advisory firms, Institutional Shareholder Services and Glass Lewis & Co., which recommended that Tim Hortons shareholders vote in favor of the deal. Many large-scale shareholders follow those firms’ recommendations closely.

Contact Jonathan Maze at [email protected].
Follow him on Twitter: @jonathanmaze

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