How Did Burger King Convince Tim Horton’s To Have It Their Way?

What exactly did Burger King say to Tim Horton’s that finally convinced the Canadian coffee and donuts shop to be purchased? It started with a phone call.

The Toronto Star reports that the whole deal-making process began in early March of this year. Alexandre Behring, chairman of Burger King and managing partner of the burger chain’s majority owner, 3G Capital, had the deal in mind, but needed help with the financing. If you need a big deal, you go to a big deal-maker. You call Warren Buffett.

Behring did, asking if Buffett could help finance the whole deal. Buffett had helped 3G Capital, a Brazillian investment firm, buy H.J. Heinz Co. in 2013, according to regulatory filings jointly submitted by the companies on Tuesday. Buffett agreed. With the financing in place, Buffett and Behring called Tim Horton’s to pitch the idea. This is where the first roadblock was hit.

Tim Horton’s had been thinking expansion, as well. Tim Horton’s had just recently hired new chief executive officer Marc Caira to oversee any possible expansion and growth. Caira wasn’t necessarily thinking a merger, and wasn’t convinced it would help Tim Horton’s grow, either. So, Caira listened.

The first obstacle was the price. Burger King had to bid three times before Tim Horton’s finally agreed to a share price of $88.50 on August 15. Caira had taken each bid back to Tim Horton’s board. The third bid was the key to opening discussions. Now, Tim Horton’s would have stipulations that could still kill the sale.

The Globe and Mail reports that Burger King was interested with Tim Horton’s burgeoning breakfast market, feeling the company would do well in America. Tim Horton’s felt that associating with a quick serve restaurant of this size could elevate their global footprint. However, Tim Horton’s wanted certain protections: Tim Horton’s stay in Canada with a meaningful number of Canadian-based executives, and that the merged entity continue to help finance franchisees’ renovations and refrain from raising franchisees’ rents and royalties for five years, as well as maintain any charitable obligations they have begun. Failure to agree to any of these stipulations would result in the deal falling through.

Through the next few months of negotiations, common ground was found for each corporation, and a deal was announced. The deal still has to be agreed to by both boards, but Tim Horton’s got what it wanted: a step into the global food business, and protection for its Canadian interests. Burger King got what it wanted, too: an established breakfast presence to build on. Once completed, corporate headquarters will be in Toronto. Burger King will have a corporate office in Florida to maintain a presence in the states for taxation purposes.

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