Warren Buffett’s Berkshire Hathaway is helping to finance Burger King’s (BKW) takeover of Canadian coffee and donut concern, Tim Hortons (THI). Buffett will make a $3 billion preferred stock investment with a yield of 9%. Burger King has already raised $9 million from bond markets for its proposed buyout of Tim Hortons for 89.32 Canadian dollars or $81.47 per share. Brazilian private equity firm, 3G Capital, will own 51% of the combined company.
Berkshire Hathaway increased its already substantial fortune lending money to companies such as Bank of America (BAC), General Electric (GE) and Goldman Sachs (GS) that were hit hard during the recession. These investments made at the depths of the financial crisis have yielded significant returns for Warren Buffett, who still owns a 2.8% stake in Goldman Sachs without having paid, in reality, anything. More recently, Buffett lended $8 billion to 3G Capital for its takeover in Heinz (HNZ).
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Warren Buffett has received blistering criticism over the Burger King/Tim Horton’s deal by those who accuse him of hypocrisy. Buffett has voiced his views on taxation openly and has made remarks that income tax rates are fair, and for some of the wealthy, too low. The deal would move Burger King’s operations to Canada, and would be characteristic of the kind of tax inversion criticized by many. However, the fact that the lion’s share of Buffett’s investments are located in the U.S. shows that he has more money invested here than many leading fund managers. The Burger King deal might be an acceptable exception to Buffett’s apparent rule of not supporting relocation for tax purposes.