Burger King Worldwide Inc (BKW) Wants a Taste of THI

By Carly Forster

Burger King Worldwide Inc (NYSE:BKW) is a Miami-Dade County, Florida based international fast-food chain known for its ‘whopper’ hamburger. The company is the second largest fast-food hamburger chain around the world. It was revealed on Sunday, August 24th that Burger King has been in talks with Canadian coffee and doughnuts chain, Tim Hortons, for the past few months in an effort to acquire the company. As of today, acquisition plans have been confirmed for about $11 billion. Together, both businesses have the potential for a combined market capitalization of about $23 billion. It is being speculated that the reason for the acquisition is so that Burger King can yield significant tax benefits by moving its base to Canada. The deal could also give Tim Hortons the opportunity to expand beyond Canada and a handful of states within the US to other countries around the globe.

Investors were very pleased with the possible acquisition on Monday, August 25th before the big announcement as Burger King Worldwide Inc (NYSE:BKW) shares increased by almost 20% to $32.40, raising its market value to about $11.4 billion. Shares of Tim Hortons Inc. (NYSE:THI) (TSE:THI) also rose about 19% in the Canadian market to $82.03, increasing its market value to $11 billion in Canadian dollars, (about $10 billion US dollars). Famous billionaire investor, Warren Buffett, is also helping to finance the acquisition with his company Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) contributing a 25% investment. The official deal is expected to be announced this week with the goal to close the deal by the end of 2014.

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Shares of Burger King opened at $31.03 on Monday, August 25th. The fast-food chain has a 1-year high of $33.97 and a 1-year low of $18.86. The stock’s daily moving average is $32.18 and has a 50-day moving average of $26.55. The market cap for Burger King Worldwide Inc (NYSE:BKW) is $11.4 billion and its P/E ratio is 45.00.

On August 25th, Wells Fargo analyst Jeff Farmer maintained a Market Perform rating for Burger King, but raised his price target from $26-$27 to $30-$32. He claimed that the stock is already reflecting aggressive assumptions of the acquisition after jumping 20%, especially with the lack of transaction details given. Farmer has a +14.0% average return on all stocks he has rated and a 70% success rate in making recommendations.

On the other hand, on August 25th Guru Focus blogger lampat spoke rather positively about Burger King, focusing on its evolving menu items. The blogger reasoned that the company’s focus on an establishment-based model is working, and it’s also concentrating on menu developments to drive traffic. Iampat has a 0.0% average return on all stocks he has rated and a 17% success rate in making recommendations.

While one financial expert believes investors are jumping the gun with the news of Burger King acquiring Tim Hortons, the other is focused on other aspects of the company he’s rather optimistic about. Whose recommendation do you trust?

To see more recommendations for Burger King Worldwide Inc (NYSE:BKW), visit TipRanks today!

Carly Forster writes about stock market news. She can be reached at [email protected]