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The Burger King logo is displayed at the post where the company's stock is traded on the floor of the New York Stock Exchange August 26, 2014.
The Burger King logo is displayed at the post where the company's stock is traded on the floor of the New York Stock Exchange August 26, 2014.
(Brendan McDermid/Reuters)

Breaking down the Tim Hortons-Burger King deal

The Burger King Worldwide Inc.-Tim Hortons Inc. tie-up has already drawn heat for its implications for the United States as a tax inversion strategy, but there’s plenty to like about the deal – especially if you’re a Tims shareholder.

The price

Tims wasn’t cheap before, trading at around 17 times price to earnings, which J.P. Morgan analysts, in a Aug. 7 report, said was “slightly above the longer-term 16-17x we believe is appropriate” for a quick-service restaurant chain. That didn’t stop Burger King and its owners, Brazilian private equity firm 3G Capital, from paying a significant premium above the recent share price. The announcement characterized the premium for the cash and shares combination offer ($65.50 cash, 0.8025 shares in the new company, per THI share) as 39 per cent above Tims’ 30-day volume-weighted average price on Aug. 22. (They can also take either $88.50 in cash, or 3.0879 common shares of the new company, pro rata.) 3G apparently isn’t afraid to pay rich prices for their targets – in 2010, they bought Burger King itself for a nearly 46-per-cent premium.