OAKVILLE, ONT.—Miami-based Burger King is buying Canada’s iconic coffee chain Tim Hortons for about $12.5 billion in a deal that will allow the two fast food companies to operate as independent brands.

The companies say the transaction will create a new company that will form the world’s third-largest quick service restaurant company.

The new global company will have about $23 billion in sales and more than 18,000 restaurants in 100 countries, allowing both chains to expand globally.

The corporate headquarters will be based in Canada, the largest market of the combined company, and could help Burger King lower its U.S. tax bill.

Oakville, Ont., will remain the global home of Tim Hortons and Miami will remain global home of Burger King.

Private equity firm 3G Capital will own about 51 per cent of the new company.

Under the terms of the transaction, Burger King will pay C$65.50 in cash and 0.8025 common shares of the new company for each Tim Hortons share. This represents total value per Tim Hortons share of C$94.05 Canadian, based on Burger King’s closing stock price on Monday. Tim Hortons shareholders can choose either all-cash or all stock in the new company.

Alex Behring, executive chairman of Burger King and managing partner at 3G Capital, will lead the new global company as executive chairman and director.

Tim Hortons president and CEO Marc Caira will be appointed vice-chairman and a director, focused on strategy and global business development.

As part of the new company’s commitment to Canada, there are no plans to change the way Tim Hortons works with its franchisees, or its business model and there are no plans to cut staff working at the restaurant level.

“As an independent brand within the new company, this transaction will enable us to move more quickly and efficiently to bring Tim Hortons iconic Canadian brand to a new global customer base,” Caira said in a statement on Tuesday.

“At the same time, our customers, employees, franchisees and fellow Canadians can all rest assured that Tim Hortons will still be Tim Hortons following this transaction, including our core values, employee and franchisee relationships, community support and fresh coffee.”

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Tim Hortons shares were up 8.9 per cent to US$82.10 in pre-market trading in New York, while Burger King ticked 0.5 per cent higher to US$32.60. Both shares surged almost 20 per cent on Monday when reports of the deal first surfaced.

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The purchase gives Burger King access to a coffee brand with a cult following, which may help boost breakfast sales. Tim Hortons, Canada’s biggest seller of coffee and doughnuts, also lets Burger King get into the grocery business by selling packaged coffees at supermarkets in North America. The new combined business would have about $23 billion in system sales and more than 18,000 restaurants in 100 countries.

The acquisition also moves the merged company’s global headquarters to Canada to take advantage of lower corporate taxes. When the companies disclosed the talks on Aug. 24, it revived debate over American companies shifting their headquarters to other countries in search of lower corporate tax bills. President Barack Obama criticized the practice in July, and his aides said that the administration would take action to stop the trend.

3G Capital, the investment firm that owns Burger King, will have about 51 per cent of the new company. Warren Buffett’s Berkshire Hathaway Inc. also has committed $3 billion of preferred equity financing, according to the statement, which didn’t disclose terms on the stake. Omaha, Nebraska-based Berkshire won’t participate in managing the restaurant business.

Burger King also may be in a position to expand Tim Hortons restaurants in the 98 countries where it operates. There may be supply-chain, marketing and administrative cost savings.

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