Burger King Worldwide Inc (BKW) – Tim Hortons Inc. (USA) (THI) Merger Deal: Warren Buffet’s Preferential Treatment Might Displease Minority Shareholders


American fast food giant Burger King Worldwide Inc (NYSE:BKW) and its Canadian counterpart Tim Hortons Inc. (USA) (NYSE:THI) announced on Sunday that there will be a possible merger of the two restaurant chains in the near future. In a surprise development, billionaire investor Warren Buffet and his Berkshire Hathaway Inc. (NYSE:BRK.A) have been said to play a major role in financing this deal. Bloomberg’s Erik Schatzker offered his opinion on the matter on Bloomberg TV’s ‘In the Loop’.

Burger King Worldwide Inc (NYSE:BKW)

“He [Buffet] is getting a $3 billion preferred stake in the new company,” said Schatzker. Buffett has been known to opt for this kind of preferred deals in the past with companies such as The Dow Chemical Company (NYSE:DOW), Goldman Sachs Group Inc (NYSE:GS), General Electric Company (NYSE:GE), to name a few. The type of preferred equity that would be offered is still not common knowledge and only this will tell if Buffett is being given preferential treatment in the Burger King Worldwide Inc (NYSE:BKW) – Tim Hortons Inc. (USA) (NYSE:THI) merger.

If Buffett really got better treatment in this deal, it will definitely draw bad blood from the rest of the shareholders.

“It’s a situation where minority shareholders will continue to exist, they will own 49% of the new Burger King Worldwide Inc (NYSE:BKW) […] and they will be wondering to themselves, “if Buffett can get such a sweetheart deal, why can’t I get the same terms?”,” Schatzker explained.

Previously, such better deals were made available to Buffett because he happened to be the lender of last resorts, as in the case of Goldman Sachs Group Inc (NYSE:GS). But in the current scenario, the situation seemed to be completely under control as JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC) had stepped up with $9 billion in debt financing.

The Oracle of Omaha was also criticized for his role in the tax inversion play, where Burger King Worldwide Inc (NYSE:BKW) is likely to shift its headquarters out of the United States to save tax. Such frequent tax inversion deals by a few companies recently have got President Obama and the United States Government worried over the possible loss in tax revenue.

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