Burger King deal to bring Berkshire quick gain

[Omaha Steve]

Source: Omaha World Herald

By Russell Hubbard

Berkshire Hathaway is set to book almost $300 million in paper stock-market gains this week, courtesy of a provision in the Burger King/Tim Hortons deal that the conglomerate helped finance.

Omaha-based Berkshire is entitled to own 1.75 percent of the common shares of the combined new company, according to the prospectus filed with the Securities and Exchange Commission. The new firm will be called Restaurant Brands International, after the takeover by Miami-based Burger King of Canadian coffee-and-doughnut chain Tim Hortons.

Shareholders of Tim Hortons approved the deal Tuesday; it is expected to close Friday after being announced in August. Berkshire’s end of the deal came with rights to buy 8.4 million common shares in the new company, costing $84,000 at a penny apiece. Shares of Burger King traded at around $32.67 Tuesday, making the stake that’s about to be bought for next to nothing worth about $275 million.

Snip: The new company will be based in Canada, which has a much lower corporate tax rate. Burger King has said the hamburger part of the business — the companies have said no mixing of the brands is envisioned — will still be subject to U.S., Florida and Miami-area taxes.

FULL story at link.

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THE ASSOCIATED PRESS
Tim Hortons says it’s Canada’s biggest seller of coffee and doughnuts.

Read more: http://www.omaha.com/money/burger-king-deal-to-bring-berkshire-quick-gain/article_10693b8a-d0c6-5d00-8277-89026a8570ec.html

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Inversion is OK for the 1%!

[elleng]

1. 'no mixing of the brands is envisioned

— will still be subject to U.S., Florida and Miami-area taxes.'

[Algernon Moncrieff]

2. I own some BRK-B and I'm not a 1%er

...and I'm looking forward to donuts at the next meeting at the Century Link Center.

P.S. Warren supported Chuck Hassebrook against Governor Voldemort

[Wellstone ruled]

5. Yes,looking forward to the same in April.

And we are not 1%ers either. Berky B's are a winner and as far as Burger Whopp,could care less they suck,maybe Hortons people can fix this nightmare. Meantime bank the profits. We do make the best Donuts in town along with the best candy. Yes!!!

[cosmicone]

3. Inversion doesn't help companies who make and sell their stuff in the US

Inversion only helps companies who make and sell product abroad such as Apple, Cisco, Google, Facebook, Microsoft etc. Even inverted companies have to pay taxes on income earned in the US.

So, this Burger King deal, if inverted will only help shelter income earned by Burger King on foreign franchises and I suspect they are not repatriating that money to the US anyway.

I think that income earned abroad should be taxed at a much lower rate in the US to bring the trillions of dollars that are not repatriated home and be invested in our economy instead of somewhere else.

e.g., if I buy a bunch of burlap bags in Bangladesh and ship them to Dubai making a profit, the US government has no moral right to tax it full-whack just because I happen to live in the US and used a US phone to arrange the deal. No other country other than the US taxes world-wide income - they tax only income earned within their borders.

[unblock]

6. the problem is that that opens the door for massive tax evasion.

say i make rum in the u.s. and sell it in the u.s. all my profit is taxed fully in the u.s.

say also that the sugar used in the rum is imported from some low-tax caribbean jurisdiction. this is just another expense, i still have to pay taxes on all the profits in the u.s.

however, i can now evade taxes by buying a sugar distributor in that low-tax jurisdiction and pay a huge markup on the sugar to that distributor. magically, all my u.s. profits vanish and shift to profits in that low-tax jurisdiction.


oh, sure, stated as such it's probably illegal. however, i can do something minimal to qualify as value-add processing to the sugar to make it something i can call special, not a commodity, and worth the substantially higher price i'm paying for it.


this is in fact what liquor companies do, and is essentially the same as what apple does. they sold a lot of their u.s.-created patents to an irish entity, so now a lot of the value-add "happens" in ireland, allowing them to shift profits from the u.s. to ireland.

any guess that the price apple ireland paid for those patents really worked out to be far market value? gee, i wonder....

[cosmicone]

7. Unless the distributor is totally independent

i.e. no more than 19.99% of the shareholders overlap, what you described would fall under the "transfer pricing" regulations of the IRS and you won't receive any benefit for doing so.

[unblock]

8. yes, this makes it more complex, but the principle holds and it is done all the time.

[Sunlei]

4. Burger King needs a BIG cupa coffee, real 1/2 & 1/2, donuts & they will crush Starbucks.