Burger King Worldwide Inc. (NYSE:BKW) shares rose yesterday after it made an enthused bid for Tim Hortons (NYSE:THI); a Canadian donut shop. The bid is being considered as a possible tax inversion. Warren Buffett always talks about elevated tax rates for the upper class but now scenario seems to be opposite when it comes to his own involvement. According to the reports this high-profile deal will be backed by Buffett’s Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B). Wall Street Journal states that a sum of $3 billion will be put in by Berkshire which most probably will be cashed as preferred shares purchase; the overall deal is of $10 billion.
Warren is going to benefit in billions from this deal. The focal point is not taxes but the way relationships and endorsements are being used in the market. 3G which is led by a billionaire who is 74 years old, Jorge Paulo Lemann is a Brazilian PE company that holds main ownership of Burger King Worldwide Inc. (NYSE:BKW). 3G and Berkshire (BRK-A, BRK-B) made a partnership last year and bought Heinz. Moreover, $8 billion shares of Berkshire will pay $1 billion a year. $4.25 billion are estimated to be acquired from common stock of Heinz. No specific terms are known regarding the Burger King Worldwide Inc. (NYSE:BKW)’s deal but it is obvious that Buffet will not hesitate to ask for a premium. Berkshire (BRK-A, BRK-B) is expected to get no less than 10% out of this $2.5 billion investment.
The above mentioned deal is not something big for Berkshire (BRK-A, BRK-B) which already has investments worth over $55 billion. One of the many other reasons for Buffet’s involvement is the protection of Berkshire’s ownership in Coke (KO) which is 9.1%. Burger King Worldwide Inc. (NYSE:BKW) has a close partnership with Heinz; on the other hand, 3G has switched its loyalties to PepsiCo, Inc. (NYSE:PEP) in markets for Latin Americans. Income of Coke (KO) has been very low since 2011 so Coke (KO) cannot afford losing its shares in the soda market. Furthermore, the developmental opportunities have been very less for Coke’s products that are non-carbonated. The bottled water of Nestle is also put on the market by Burger King Worldwide Inc. (NYSE:BKW) so Burger King Worldwide Inc. (NYSE:BKW) is not expected to switch to Coke (KO).
Historically speaking, Warren Buffet can be taken as a fine example of American Dream. A kid who bought six packs of Coke and sold them to his friends with a little profit now owns 9% shares of Coke (KO). He further owns half of Heinz and is known as the master of the U.S. financial system. He is a synonym of Ben Franklin who has the guts to bear all the criticism in the world but won’t give up. On one hand, Buffet is an ever growing hero; on the other hand, he is said to be listed in U.S. corporate tax avoidance directory. To sum up, the surging popularity of Buffet has made him more important than the U.S. President or the Congress. Buffet has set a fine example for the generations to come.
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