By Nathan Vardi, Forbes
The inversion deal wave that has seen American companies purchase foreign companies and reincorporate outside the U.S. to lower taxes has been to a large degree fueled by Wall Street and prominent money mangers. Now, the biggest money man of them all is backing the Burger King Worldwide BKW -4.32% effort to buy Canada’s Tim Hortons doughnut chain and redomicile north of the border.
An illuminated Burger King sign is seen on August 25, 2014 in Washington, DC. Fast-food chain Burger King plans to buy Canadian chain Tim Hortons in an acquisition that will make it the world’s third largest in the fast-food sector. As part of the deal, Burger King will move its headquarters to Canada where the company would benefit from Canada’s more favorable tax code. (MANDEL NGAN/AFP/Getty Images)
Warren Buffet’s decision to finance Burger King’s inversion transaction, first reported by The Wall Street Journal, is just the latest example of a prominent billionaire investor backing such a deal. In fact, the Burger King inversion deal is being driven by Jorge Paulo Lemann, Brazil’s richest man and co-founder of 3G Capital, the private equity firm that holds a majority stake in Burger King.
The reason big investors like inversion deals is clear from the way shares of Burger King and Tim Hortons both soared after The Wall Street Journal first reported on the deal talks the two companies were holding. While the tax considerations are not the only thing driving the companies and investors, the shares of both companies rose by about 19%. In typical corporate transactions, shares of the buying company tend to fall when deals are announced. Buffett’s Berkshire Hathaway will reportedly finance the deal through preferred shares. Buffett has invested with 3G Capital in the past, partnering up to buy H.J. Heinz.
President Barack Obama has denounced inversion deals, calling for “economic patriotism” and saying that companies that do enter into such transactions are “corporate deserters.” It will be interesting to see how Obama reacts to Buffett’s involvement with the Burger King deal. The White House declined to comment on the deal on Monday before Buffett’s involvement became public. Over the years, Buffett has been a vocal advocate for Obama, particularly backing Obama’s effort to increase taxes on the rich and close tax loopholes.
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