Tim Hortons Inc. (USA) (THI), Burger King Worldwide Inc (BKW) Agree To Merge: 3G Capital Will Own Over 50% of New Company

In a newly amended filing with the U.S. Securities and Exchange Commission, 3G Capital, managed by Jorge Paulo Lemann, disclosed that it entered into a voting agreement related to the merger  between Tim Hortons Inc. (USA) (NYSE:THI) and Burger King Worldwide Inc (NYSE:BKW). According to the filing, 3G Capital holds 243.86 million shares of Burger King Worldwide Inc (NYSE:BKW), equal to 69.22% of common stock outstanding.

Jorge Paulo Lemann

On August 26, Tim Hortons Inc. (USA) (NYSE:THI) and Burger King Worldwide Inc (NYSE:BKW) announced that they entered into a merger agreement to create “the world’s third largest quick service restaurant company.” The new global company will be based in Canada. 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, according to a press release.

Under the agreement, Tim Hortons Inc. (USA) (NYSE:THI) shareholders will receive C$65.50 in cash and 0.8025 common shares of the new company per Tim Hortons Inc. (USA) (NYSE:THI) share. Based on Burger King Worldwide Inc (NYSE:BKW) closing stock price as of August 22, 2014, this represents total value per Tim Hortons Inc. (USA) (NYSE:THI) share of C$89.32 and based on Burger King Worldwide Inc (NYSE:BKW) closing stock price as of August 25, 2014, this represents total value per Tim Hortons share of C$94.05.

Alex Behring, executive chairman of Burger King Worldwide Inc (NYSE:BKW) 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 Inc. (USA) (NYSE:THI), will be named vice-chairman and a director. Daniel Schwartz, CEO of Burger King Worldwide Inc (NYSE:BKW), will be named Group CEO of the new company. The new company’s board will include the current eight Burger King Worldwide Inc (NYSE:BKW) directors and three directors to be appointed by Tim Hortons Inc. (USA) (NYSE:THI), including Mr. Caira.

In connection with the agreement, 3G Capital, which holds around 243.86 of Burger King Worldwide Inc (NYSE:BKW) outstanding shares, entered into a voting agreement with Tim Hortons Inc. Pursuant to the voting agreement, the hedge fund party to the voting agreement also granted to Tim Hortons Inc. an irrevocable proxy to secure the fund’s obligations under the voting agreement. In addition, pursuant to the voting agreement, the fund party to the voting agreement agreed that it would make a partnership election in connection with the merger, 3G Capital states in the filing.

“3G Capital will retain all of its investment in [Burger King Worldwide Inc (NYSE:BKW)] by converting its roughly 70% equity stake in [Burger King Worldwide Inc (NYSE:BKW)] 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 Worldwide Inc (NYSE:BKW)] and Tim Hortons.”

It’s interesting to point out that 3G Capital is in a way related to Warren Buffett‘s Berkshire Hathaway, which will also participate in the merger by acquiring $3 billion worth of preffered stock in the new company. Earlier in 2013, 3G Capital and Berkshire partnered to acquire H.J. Heinz for $23 billion.

Disclosure: none

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