$11.4 billion dollars to doughnuts; Burger King to move HQ north in Tim Hortons deal.

Byline: Leslie Patton and Craig Giammona

Burger King Worldwide Inc. agreed Tuesday to acquire Tim Hortons Inc. for about C$12.5 billion ($11.4 billion) in a deal that creates the third-largest fast-food company and moves its headquarters to Canada.

Tim Hortons investors will receive C$65.50 in cash and 0.8025 a share of the combined entity for each share they own, the companies said in a statement Tuesday. The transaction, which is backed in part by Warren Buffett's Berkshire Hathaway Inc., values each Tim Hortons share at C$94.05, based on Burger King's closing price Monday.

The purchase brings Burger King the biggest seller of coffee and doughnuts in Canada, which it can use to grow internationally. The deal also lets the burger chain push into the grocery business by selling packaged coffees at supermarkets in North America. The combined business would create a fast-food network with $23 billion in sales, including franchisees, and more than 18,000 restaurants in 100 countries.

"There's value to be extracted and there are international growth opportunities,'' said Will Slabaugh, an analyst at Stephens Inc. in Little Rock, Ark. "I think it's going to be a well-received deal.''

The acquisition also moves the merged entity's global headquarters to Canada, potentially taking advantage of lower corporate taxes. When the companies disclosed talks Aug. 24, it heightened debate over American businesses shifting to other countries in search of lower tax bills. President Barack Obama criticized the practice in July, and his aides said the administration would take action to stop the trend.

The merger talks sent shares of both companies soaring Monday. Burger King rose 20 percent, but retreated 4.3 percent to $31 Tuesday. Tim Hortons climbed 19 percent Monday and another 8.1 percent Tuesday, rising to C$88.71 in Toronto.

Tim Hortons shares are trading below the deal price because investors see a risk that the government may move to blunt the tax savings, said Stephen Anderson, a New York-based analyst at Miller Tabak & Co.

"It's a political concern; it's nothing that will derail the deal in my view,'' he said.

Buffett buys in

3G Capital, the Brazilian investment firm that owns about 70 percent of Burger King, will convert that stake into roughly 51 percent of the new company. Berkshire Hathaway has committed $3 billion of preferred equity financing, according to the statement. Berkshire will earn 9 percent annual interest on its investment, which...

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