By Paul Vieira
The Canadian government approved Burger King Worldwide Inc.'s
$11 billion deal to buy local coffee-and-doughnut retailer Tim
Hortons Inc. on Thursday, clearing another hurdle toward the
creation of the world's third-largest fast-food restaurant
chain.
The deal, which is partly financed by Warren Buffett, sparked
fierce debate in the U.S. as some lawmakers accused Burger King of
buying the Canadian firm to relocate headquarters abroad for tax
purposes. But in Canada, some consumers bemoaned what they saw as a
beloved national brand falling into foreign hands.
Burger King executives have said the transaction wasn't driven
by taxes. The Canadian government said the global headquarters of
the combined company, with about $23 billion in system sales across
more than 18,000 restaurants, would be based in Oakville, outside
of Toronto.
That location of a headquarters was among several conditions
Burger King agreed to in exchange for approval, Canadian Industry
Minister James Moore said in a statement. Burger King, based in
Miami but owned by Brazilian-U.S. investment firm 3G Capital, also
agreed to maintain employment levels at Tim Hortons' Canadian
outlets, and expand the coffee chain's global presence at a
"significantly greater" pace than previously envisaged.
Burger King officials also pledged to manage Tim Hortons as a
distinct brand, with no co-branding at any North American
locations, and maintain the franchisee rent and royalty structure
at current levels for a five-year period.
"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," said Mr. Moore, part of whose job is to
enforce the country's foreign-investment laws.
Under Canadian law, officials have to review of foreign-led
investments and acquisitions of local based assets to see if they
provide a so-called net benefit to the country's economy.
Conservative government officials had signaled approval of the
transaction was likely in the offing, as it lauded Burger King's
decision to set up headquarters in suburban Toronto as proof that
its drive to lower corporate tax rates was attracting
investment.
Still, Canada has rejected several foreign acquisitions in
recent years. In 2008, it rejected U.S. aerospace and defense firm
Alliant Techsystems Inc.'s takeover of MacDonald Dettwiler &
Associates Ltd. Two years later, the country's Conservative
government blocked BHP Billiton's multibillion-dollar hostile
takeover of Potash Corp. of Saskatchewan.
Tim Hortons stores are ubiquitous in Canada, and its advertising
plays on its roots in that country and its favorite pastimes, such
as hockey.
Mr. Buffett's Berkshire Hathaway Inc. provided $3 billion in
financing through preferred shares that will carry a 9% coupon.
Berkshire Hathaway, which previously joined with 3G to buy H.J.
Heinz & Co. in 2013, won't be involved in the management of the
Burger King-Tim Hortons company.
Write to Paul Vieira at paul.vieira@wsj.com
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