Buffett’s $3 Billion Investment On Burger King To Fetch 9%

Buffett’s $3 Billion Investment On Burger King To Fetch 9%

Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) is set to invest $3 billion for Burger King Worldwide Inc (NYSE:BKW)’s proposed takeover of Canadian coffee-and-doughnut chain Tim Hortons Inc. (NYSE:THI) (TSE:THI) and will earn 9% annual interest on the investment.

Play Quizzes 4

Also see: FutureAdvisor Offers Asset Management Services In A Low-Fee World

With yields at near record lows, Buffett has shunned bets in publicly traded bonds, preferring deals in which his reputation and the size of the cash hoard facilitate Berkshire to lock in better rates compared to other investors.

Alight Capital Outperforms As Fund Positions For Uncertainty

Invest ESG Leon CoopermanAlight Capital Management declined 1.3% on a net basis for the first quarter of 2022, according to a copy of the firm's quarterly update, which ValueWalk has been able to review. Short positions offset most of the losses on the long side of the portfolio. The long/short equity fund exited the quarter with a net Read More

Burger King’s tax inversion deal

Burger King Worldwide Inc (NYSE:BKW) announced Tuesday its plans to acquire Tim Hortons Inc. (NYSE:THI) (TSE:THI) with the combined company enjoying around $23 billion in total sales, with over 18,000 restaurants spread across 100 countries. As part of the deal, the burger chain announced that it would move part of its headquarters to Ontario and avoid paying millions in U.S. corporate taxes.

Tax inversion deals facilitate U.S. companies in paying lower tax rates by setting up offices in a country with lower tax rates. Such maneuvers have come under greater scrutiny from Senate Democrats recently. The first half of 2014 witnessed a heightened frenzy in such tax inversion deals, with nearly 50 companies announcing plans.

President Obama denounced inversion deals as an ‘unpatriotic tax loophole’. The following graph captures the surge in the tax inversion deals:


Buffett’s $3 billion investment

Earlier it was expected Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) would provide roughly 25% of the financing for the deal and would receive preferred shares in the combined entity. In a conference call for investors, Burger King Worldwide Inc (NYSE:BKW)’s chief executive officer Daniel Schwartz disclosed that Buffett’s investment would fetch a 9% rate on the preferred stake, which compares favorably with a yield of about 8% on Burger King’s $791 million of 9.875% bonds due in October 2018.

Warren Buffett had previously injected capital into financial firms like Goldman Sachs Group Inc (NYSE:GS) and Bank of America Corp (NYSE:BAC) at times of crisis. He has also made investments in food and beverage companies with well-known brands including The Coca-Cola Company (NYSE:KO), and ice-cream chain Dairy Queen. He made 10% a year on a $5 billion preferred stake in Goldman Sachs and in a $3 billion bet on General Electric Company (NYSE:GE).

Jorge Paulo Lemann’s 3G Capital is currently the majority owner of Burger King. Warren Buffett partnered with 3G last year to buy H.J. Heinz Company (NYSE:HNZ), and he has said that he would be happy to work with them again.

Updated on

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
Previous article 3D Systems Corporation, SME Create Advisory Board For M.Lab21 Initiative
Next article Splunk Inc Earnings: Big Beat Needed To Recapture Investors

No posts to display