Burger King announces acquisition of Tim Hortons
An agreement was reached today to create the world’s third largest quick service restaurant company. Tim Hortons Inc. and Burger King Worldwide Inc. today announced a definitive agreement under which the two companies will create a new global powerhouse in the quick service restaurant sector. With approximately $23 billion in system sales, over 18,000 restaurants in 100 countries and two strong, thriving, independent brands, the new company will have an extensive international footprint and significant growth potential. The new global company will be based in Canada, the largest market of the combined company.
Tim Hortons and Burger King each have strong franchisee networks and iconic brands that are loved by their guests. Following the closing of the transaction, each brand will be managed independently, while benefitting from global scale and reach and sharing of best practices that will come with common ownership by the new company.
Alex Behring, Executive Chairman of Burger King and Managing Partner of 3G Capital, said, "By bringing together our two iconic companies under common ownership, we are creating a global QSR powerhouse. 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. We have great respect for the Tim Hortons team and look forward to working together to realize the full potential of these two extraordinary businesses."
Marc Caira, President and CEO of Tim Hortons, said, "We are very proud of the great history of our organization and the progress we have achieved in creating value and delivering the ultimate experience for our guests. As an independent brand within the new company, this transaction will enable us to move more quickly and efficiently to bring Tim Hortons iconic Canadian brand to a new global customer base. At the same time, our customers, employees, franchisees and fellow Canadians can all rest assured that Tim Hortons will still be Tim Hortons following this transaction, including our core values, employee and franchisee relationships, community support and fresh coffee."
"Over the past four years, we have transformed Burger King into one of the fastest-growing and most profitable QSR businesses in the world, through successful international growth, a consistent focus on brand revitalization and strong commitment to our franchisees," said Daniel Schwartz, CEO of Burger King. "We are excited to build on this progress as we continue to expand Burger King around the world and look forward to working with and learning from Tim Hortons as we together create the world’s leading global restaurant business."
At the time of closing, Alex Behring, Executive Chairman of Burger King and Managing Partner at 3G Capital, will lead the new global company as Executive Chairman and Director. Marc Caira, President and CEO of Tim Hortons, will be appointed Vice-Chairman and a Director, focused on overall group strategy and global business development. Daniel Schwartz, CEO of Burger King, will become Group CEO of the new company, with overall day-to-day management and operational accountability. The new company’s board will include the current eight Burger King directors and three directors to be appointed by Tim Hortons, including Caira.
Caira and Schwartz will continue as Tim Hortons and Burger King CEOs, respectively, through the transition period, and additional executives in the new global company structure will be identified from Burger King and Tim Hortons during the transition period and announced at the time of closing. Both Burger King and Tim Hortons will continue to operate after the closing as standalone, independent brands which leverage global shared services and best practices.
The current Tim Hortons headquarters in Oakville, Ontario will continue to be the global home of the Tim Hortons business. Burger King’s current headquarters in Miami, Florida will continue to be the global home of the Burger King business. It is expected that the shares of the new parent company will be listed on the New York Stock Exchange and the Toronto Stock Exchange.
As part of its commitment to Canada, the new company will endorse the following principles:
- Tim Hortons will continue to manage its own operations, headquartered in Oakville, and continue its significant community involvement, including the Tim Horton Children‘s Foundation, TimBits Minor Sports Program, Tim Hortons Coffee Partnership and its community, sustainability and charitable programs.
- This transaction will not change the way Tim Hortons works with its franchisees or its business model. There are no plans to change the rents, royalty structures, customer-facing programs, Franchise Advisory Board or the franchisee-facing operational resources Tim Hortons provides to support its franchisees in building their businesses.
- Likewise, there will be no changes to restaurant-level employment and the new company will rely heavily on the Tim Hortons talent pool to staff the new organization at all levels of responsibility. As a result, the global company‘s management and shared services operations will consist of a meaningful number of Canada-based executives.
Similarly, Burger King will continue to support and preserve its long-standing commitment to local communities and charitable causes in the United States, including the Burger King Scholars Program.
3G Capital will retain all of its investment in Burger King by converting its roughly 70% equity stake in Burger King into equity of the new company. On a pro forma basis, 3G Capital is expected to own approximately 51% of the new company with the balance of the common shares to be held by current public shareholders of Burger King and Tim Hortons.
The combination generates substantial value for shareholders of both companies and provides the opportunity for shareholders to participate in the new company’s long-term value creation potential. In addition to meaningful revenue synergies created from accelerated international growth, the transaction is expected to achieve cost savings through leveraging the new company’s global scale and the sharing and implementation of best practices.
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. The obligation of JP Morgan and Wells Fargo to provide this committed debt financing is subject to a number of customary conditions, including execution and delivery of certain definitive documentation. It is expected that the debt financing for the transaction will consist of a $6.75 billion senior secured term loan B facility, a $500 million senior secured revolving credit facility and senior secured second-lien notes in the amount of $2.25 billion.
Berkshire Hathaway has committed $3 billion of preferred equity financing. Berkshire is simply a financing source and will not have any participation in the management and operation of the business.
The transaction is subject to customary closing conditions, including approval of Tim Hortons shareholders and receipt of certain antitrust and regulatory approvals in Canada and the U.S. Since 3G Capital already owns approximately 70% 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.
Further information regarding the transaction will be included in a joint information circular/statement to be mailed to the shareholders of both Tim Hortons and Burger King. The Arrangement Agreement and Plan of Merger provides that Tim Hortons is subject to customary non-solicitation provisions.
Both companies’ boards of directors have unanimously determined that the proposed combination is in the best interests of their respective companies. Each of RBC Capital Markets and Citi has delivered a fairness opinion to the board of directors of Tim Hortons, and Lazard has delivered a fairness opinion to the board of directors of Burger King.
Lazard, J.P. Morgan and Wells Fargo served as financial advisors to Burger King. Kirkland & Ellis LLP, Davies Ward Phillips & Vineberg LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal counsel to Burger King.
Citi and RBC Capital Markets are serving as financial advisors to Tim Hortons. Wachtell, Lipton, Rosen & Katz and Osler, Hoskin & Harcourt LLP are serving as legal counsel to Tim Hortons.
Source: Burger King