David Feirstein and William Sorabella ()
William Sorabella, 39, and David Feirstein, 36, New York-based corporate partners at Kirkland & Ellis.
Burger King Worldwide Inc., a Miami-based fast-food chain.
Burger King on Tuesday announced that it would merge with Canadian quick-serve coffee-and-doughnut chain Tim Hortons Inc. in a transaction valued at $11.4 billion. As part of the deal, the combined company would be headquartered in Ontario, Canada, where Tim Hortons is based, in a controversial move known as a corporate tax inversion, where U.S. companies acquire foreign businesses as a way to lower their taxes.
Under the terms of the agreement, which has been approved by the boards of directors of both companies, shareholders of Tim Hortons would receive the equivalent of $59.81 in cash and 0.8025 common shares in the combined company for each share of Tim Hortons, which is a 39 percent premium over Tim Hortons’ closing price on Aug. 22. Alternatively, each Tim Hortons shareholder could elect to receive either $80.81 in cash or 3.0879 common shares of the combined company for each share of Tim Hortons, subject to proration.
Burger King executive chairman Alex Behring, who is also managing partner of 3G Capital Management LLC, the Brazilian global investment group that owns 70 percent of Burger King, would lead the combined company upon the deal’s closing. 3G Capital would retain its majority control with a 51 percent stake.
Burger King is using $9.5 billion in debt financing from Wells Fargo and J.P. Morgan to pay for the deal. Warren Buffett’s Berkshire Hathaway is also giving $3 billion in preferred stock financing.
Although the combined company would be based in Canada, Burger King and Tim Hortons would continue to operate independently, and Burger King’s home offices would remain in Miami.
As The Am Law Daily reported on Tuesday, Paul, Weiss, Rifkind, Wharton & Garrison and Canadian firm Davies Ward Phillips & Vineberg also advised Burger King on the Tim Hortons deal. Wachtell, Lipton, Rosen & Katz represented Tim Hortons with Canadian firm Osler, Hoskin & Harcourt. Munger Tolles & Olson represented Berkshire Hathaway. Skadden, Arps, Slate, Meagher & Flom advised Citigroup as the financial adviser to Tim Hortons.
THE BIG PICTURE
The merged company would create the world’s third-largest fast-food chain, with about $23 billion in sales and 18,000 restaurants in 100 countries. It also represents the latest—and most evident —example of a corporate tax inversion by a U.S. company, although Burger King denies that tax savings motivated the deal, as previously reported by The Am Law Daily.
Behring has said the shift of corporate headquarters to Canada is necessary because the majority of Tim Hortons 4,000 restaurants are located there.
“We realized that this is a transaction involving a Canadian brand, and it was very important for the company to be based in Canada,” Sorabella says.
Kirkland & Ellis has been setting the table for Burger King since at least 2010.
Sorabella was named Dealmaker of the Year by The American Lawyer in 2011 for his work for 3G Capital in its $4 billion acquisition of Burger King Holdings Inc. announced in Aug. 2010.
Sorabella and Feirstein teamed up to advise 3G Capital Partners in 2013 on its $28 billion purchase with Berkshire Hathaway of ketchup-and-pickle purveyor H.J. Heinz Company. The pair also helped Burger King and 3G Capital on its combination with Justice Holdings Limited, a London Stock Exchange-listed public investment vehicle, resulting in a partial sale of Burger King to Justice shareholders for $1.4 billion and a New York Stock Exchange listing of Burger King in 2012.
Timing proved to be an obstacle in the merger, both partners say. Though talks between Burger King and Tim Hortons had been going on for months, word of an impending deal got out and was reported in The Wall Street Journal the evening of Aug. 24, two days before the deal’s official announcement. With shares of both companies suddenly in play on the New York and Toronto stock exchanges, the lawyers, including in-house counsel, rushed to complete the deal during the last week of August, a time when many people are on vacation.
“My kids went to the beach every day at the Jersey Shore while I worked out of the home office of the beach house, and they came back every day to tell me how the day was,” Sorabella says.
“My eight-months-pregnant wife knew I was working around-the-clock, but didn’t know why until I came home the morning we announced the deal after being at the office all night,” Feirstein says.
The proposed deal still requires the approval of Tim Hortons’ shareholders and antitrust and regulatory approvals in the U.S. and Canada. No shareholder vote is needed from Burger King because it is majority-owned by 3G Capital.
Sorabella and Feirstein say they don’t anticipate any major roadblocks to getting those approvals, despite public controversy on both sides of the border about the deal.
“It is a terrific thing to do for both stockholders, so we don’t believe it will suffer from meaningful opposition,” Feirstein says.