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Burger King to Acquire Tim Hortons and More Industry News

Burger King to Acquire Tim Hortons and More Industry News


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A roundup of this week’s food industry financial news

The burger chain confirmed that it will acquire Tim Hortons for $11.4 billion.

This week in industry news, Burger King confirmed that it will acquire Tim Hortons for $11.4 billion, Zoe’s Kitchen Inc.’s profit jumped 164.5 percent in the second quarter, and McDonald's USA president Jeff Stratton announced his retirement after 41 years with the brand.

Read on for more of this week's biggest financial news in the world of food.

Earnings

Zoe’s Kitchen Inc.: In the second quarter, the company’s profit jumped 164.5 percent, and same-store sales rose 7.5 percent.

Bob Evans Farms Inc.: The company suffered a $1 million loss in profit in its first quarter.

Leadership Change

Photo Credit: Flickr/Mike Mozart

McDonald's Corporation: McDonald's USA president Jeff Stratton announced his retirement after 41 years with the brand. Former McDonald's executive Mike Andres will take his place, effective October 15.

Teriyaki Madness: The company named Michael Haith as CEO, succeeding co-founder Rod Arreola, who will continue to oversee development of the fast food chain.

Mergers/Acquisitions

Burger King Worldwide Inc.: The burger chain confirmed that it will acquire Tim Hortons for $11.4 billion.

Buffalo Wild Wings Inc.: As it continues to buy into emerging brands, Buffalo Wild Wings made a majority investment in Rusty Taco Inc. Terms of the investment were not disclosed.

Inclusion Technologies L.L.C.: The company acquired assets of AnaCon Foods Co., including a 30,000-square-foot manufacturing facility in that will serve as its headquarters.

Have the inside scoop on a merger or acquisition? Know of a new advertising campaign around a new iconic product? We’re always looking to get ahead of the game, so email us your tips.

Haley Willard is The Daily Meal's assistant editor. Follow her on Twitter @haleywillrd.


Burger King to buy Canada's Tim Hortons for $11.5 billion

TORONTO, Aug 26 (Reuters) - Burger King Worldwide Inc BKW.N announced plans to buy Canadian coffee and doughnut chain Tim Hortons Inc THI.TO for C$12.64 billion ($11.53 billion) in a cash-and-stock deal that would create the world's third-largest fast-food restaurant group.

With roughly $23 billion in combined annual sales, more than 18,000 restaurants in 100 countries and two strong, independent brands, the new entity would have an extensive global footprint and significant growth potential, the companies said in a joint statement on Tuesday.

The companies had said on Sunday that they were in merger talks, and shares of both soared on Monday.

Tim Hortons shareholders will receive C$65.50 in cash and 0.8025 shares of the new company for each of their shares. Based on Monday’s close, the deal values Tim Hortons at C$94.05 a share, a 37 percent premium to Friday’s close of C$68.78 on the Toronto Stock Exchange.

Tim Hortons’ New York-listed shares rose 12 percent to $83.50 in premarket trading. Burger King was up 5 percent at $33.96.

Billionaire investor Warren Buffett's Berkshire Hathaway BRKa.N has committed $3 billion of preferred equity to finance the deal but will have no role in managing the business, the companies said.

3G Capital, a New York-based investment firm with Brazilian roots, owns roughly 70 percent of Burger King and is set to hold about 51 percent of the new combined company.


Burger King in Talks to Buy Tim Hortons

NEW YORK (The Deal) -- Burger King Worldwide (BKW)  said Sunday it was in talks to acquire Canadian coffee and doughnut chain Tim Hortons (THI) , in a deal that would relocate the buyer north of the border, into a lower rate of taxation.

Burger Kind and Tim Hortons both declined to comment on the talks, first reported late Sunday by the Wall Street Journal, but they did release a joint statement confirming the discussions.

3G Capital, a Brazilian private equity firm that took Burger King private in 2010, and currently owns a 70% stake, will continue to retain a majority stake should the deal be completed. A merged Burger King-Tim Hortons would encompass more than 18,000 locations in more than 110 nations, generating $22 billion in revenue annually. The combined entity would also be the third-largest quick service restaurant in the world.

The Deal&aposs Jon Marino and Sarah Pringle talk Burger King in Monday&aposs Merger Talk:

WATCH: More market update videos on TheStreet TV

The merger talks have proved immediately accretive for both companies. Going into Monday&aposs market open, shares of both companies were up more than 10 percent and moved even higher once the market opened.

Burger King shares traded up 15.5%, to $31.31 on Monday morning. Tim Hortons shares traded up 19.5%, to $75.10.

While Hortons stock rose on expectations of a premium payout, Burger King shares also rose on the expectations that its buying the Canadian coffee leader would reduce its tax rate. An inversion deal, similar to those being pursued in the pharmaceutical industry, would reduce its tax rate by more than 9%, compared to what the company pays now. The U.S. corporate tax rate is 40% the Canadian regulations tax at a rate of 26.5%, according to KPMG LLP.

One of the things that could impact the transaction is an attempt by U.S. lawmakers to dissuade so-called inversion tax deals via new legislation, but there are no laws currently in place yet to disrupt these inversions. Already, drugstore Walgreen (WAG)  opted to not do an inversion deal, despite striking an agreement to buy Alliance Boots GmbH, a transaction that would have enabled the company to move out of the U.S. to a more friendly rate of taxation.

AbbVie Inc.&aposs $54 billion agreement to buy Shire plc and Medtronic Inc.&aposs proposed $43 billion tie-up with Covidien plc, which like Shire is based in the tax haven of Ireland, are among the largest so-called inversion deals announced this year.

But, according to industry analysts, Burger King isn&apost just looking to buy its way into a tax discount with the Tim Hortons talks. The breakfast segment of fast-food chains&apos menus has for the most part been valuable to their top line as of late, thanks to consumers&apos growing need for a quick meal to begin the day.

Industry figures show that the $27.4 billion last year spent on fast food breakfasts represent an increase of about 5% from the prior year. Burger King has lagged behind leading industry titan, McDonald&aposs Corp., which has been a top-line leader selling coffee and breakfast sandwiches for years. The company, which generated more than $27 billion in sales in 2013, drew $10 billion in revenue the prior year through its breakfast menu alone.

Thanks to Tim Hortons being a market leader in Canada, particularly in the coffee segment of the breakfast market, the deal also has the potential to reverse Burger King&aposs struggles in this segment, where new competitors have emerged.

Tim Hortons is named for its founder, a former Toronto Maple Leafs player in the National Hockey League.

While the inversion angle of the deal is compelling, the restaurant industry itself has seen a substantial amount of M&A this year, by corporates and strategic alike. Private equity firms have been eager to get deals done in the middle market, including transactions this year for TGI Friday Inc., Darden Restaurants Inc.&aposs Red Lobster and On the Border Mexican Grill and Cantina, among others by LBO shops.

Burger King itself returned to the stock market in April 2012, less than two years after 3G Capital took the chain private for $4 billion. 3G Capital sold a 29% stake in Burger King to acquisition vehicle Justice Holdings Ltd. for $1.4 billion as part of the deal. The transaction valued Burger King at about $8 billion and gave it a New York Stock Exchange listing.


Buffett greases $11B Burger King-Tim Hortons deal

Burger King on Tuesday confirmed plans to acquire Ontario-based Tim Hortons for —creating a new company to be based in Canada with combined sales of $23 billion.

Berkshire Hathaway C hairman and CEO Warren Buffett is helping to fund the deal by committing $3 billion of preferred equity financing. The news release on the deal did not disclose the terms for Berkshire, which is only a financing source and will not have any participation in the management and operation of the business.

Under the deal, which has been approved by both boards, Tim Hortons shareholders will receive C$65.50 in cash and 0.8025 common shares of the new company for every Tim Hortons share. Based on Burger King's closing stock price as of Friday, this represents a total value per Tim Hortons share of C$89.32. Based on Burger King's closing stock price as of Monday, this represents total value per Tim Hortons share of C$94.05.

Following the closing of the transaction, each brand will be managed independently. The Tim Hortons business will continue to be headquartered in Oakville, Ontario, while Burger King's headquarters will remain in Miami.

The new parent company is expected to be listed on the New York Stock Exchange and the Toronto Stock Exchange.

Brazilian private-equity firm 3G Capital Management will retain all of its investment in Burger King by converting its roughly 70 percent equity stake in the chain into equity of the new company. 3G Capital—which joined Buffett in last year's $23 billion takeover of H.J. Heinz—is expected to own approximately 51 percent of the new fast food company.

Burger King has obtained commitments for $12.5 billion of financing to fund the cash portion of the transaction, including commitments for a $9.5 billion debt financing package led by JPMorgan and Wells Fargo.

Amid speculation that the deal was motivated to save taxes by moving a U.S. company's headquarters to a foreign country, sources said the U.S. would receive at least as much in taxes, not less, because of the way the deal is structured. Those sources did not elaborate. Locating the new company's base in Canada was seen as a way to garner support from Canadian regulators, which tend to take a dim view of foreign acquirers, the sources said.

By CNBC, with reporting by CNBC anchor Andrew Ross Sorkin and wire services.


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“These guys will change consumer goods and food service forever and other CEOs know it,” said Ken Harris, managing partner at Chicago-based Cadent Consulting Group. “They are going to go in and streamline everything as fast as possible.”

The firm’s Brazilian founders — led by the trio of Jorge Paulo Lemann, Carlos da Veiga Sicupira and Marcel Herrmann Telles — have been working together for at least four decades, during which their combined fortunes have soared to $46.7 billion, according to the Bloomberg Billionaires Index. Lemann, Brazil’s richest man, is worth $24.9 billion.

Burger King Tuesday said it will acquire Tim Hortons for about C$12.5 billion ($11.4 billion) in cash and stock.

Spending Limits

At Heinz, which 3G and Warren Buffett’s Berkshire Hathaway Inc. bought last year, employees were restricted to spending $15 a month on office supplies and told they couldn’t use mini-refrigerators to save on electricity, according to a memo obtained by Bloomberg News. 3G limits printing to 200 pages a month per employee and restricts colour pages to “customer-facing purposes.”

3G also cut several hundred jobs at the company’s Pittsburgh headquarters, including 11 senior executives, and grounded corporate jets.

At Burger King, 3G did away with comfortable offices that top executives and their secretaries had enjoyed, which people at Burger King called Mahogany Row. Executives now sit in a bare-bones, open-plan office. 3G also ended an annual $1 million bash at a chateau beside an Italian lake held by the Europe, Middle East, and Africa division.


Young Management

The plan to move to Canada follows Burger King’s stock-market debut in 2012. The chain had been taken private in 2010 by 3G, which got $1.4 billion in cash from the public offering.

About a year after it was taken public, 3G put one of its partners, Daniel Schwartz, at the helm of the fast-food chain. Schwartz, 34, a Cornell University graduate, had no experience in the industry before going to Burger King. Chief Financial Officer Josh Kobza and Alex Macedo, who runs North America for Burger King, also are under 40 years old.

U.S. fast-food restaurants are struggling with shaky consumer confidence and steep competition, adding pressure to find ways to alleviate the burden. Burger King has been trying to draw customers with value deals, such as a two-sandwiches-for-$5 offer, as well as some new limited-time fare such as chicken fries.

Tim Hortons, which claims to sell eight out of 10 cups of coffee in Canada, was founded by Hall of Fame Toronto Maple Leafs hockey defenseman Tim Horton in 1964 and has become one of the nation’s most recognized brands. Wendy’s Co. acquired the chain in 1995 and then spun it off as a public company in 2006.


Burger King Acquires Tim Hortons for $11.4 Billion

Burger King Worldwide (BKW) agreed on Tuesday to buy the Canadian restaurant Tim Hortons (THI) for about $11.4 billion creating one of the biggest fast-food chains in the world.

Today, Burger King and Tim Hortons shares are up .80% and 8.82%, respectively, on the positive news. Over the past week, Tim Horton’s stock has returned 31.40% and Burger King has returned about 22.5%.

As originally planned, Burger King will move its headquarters to Canada and will be saving millions of dollars thanks to the lower corporate tax rate in Canada. This will only elevate the debate over tax inversions that President Obama has been trying to prohibit as of late.

The American corporate tax rate is approximately 35% while Canada’s is about 15% (though Ontario has a provincial corporate tax of 11.5%). According to the company’s recent 10-Q, Burger King paid a tax rate of roughly 27% and would shave off a couple percentage points by moving to Canada.

Under the terms of the deal, Burger King will pay 65.50 Canadian dollars in cash and 0.8025 of one of its shares for each Tim Hortons share, which is about $94.05 dollars a share. As an alternative, shareholders will be able to choose to receive either C$88.50 in cash or 3.0879 shares of the new company.

Helping with the transaction, legendary investor Warren Buffett’s Berkshire Hathaway Inc. (BRK.B) is providing $3 billion in preferred equity financing. The majority stake shareholder, 3G Capital with its original 70% equity interest in Burger King, will decrease its equity interest to 51% in the combined companies. Berkshire Hathaway, which previously joined with 3G to buy H.J. Heinz & Co. in 2013, won't be involved in the management or operation of the business.

"By bringing together our two iconic companies under common ownership, we are creating a global [quick service restaurant] powerhouse," said Alex Behring, executive chairman of Burger King and managing partner of 3G Capital.

Burger King has also obtained commitments for $12.5 billion of financing for the cash portion, including commitments for a $9.5 billion debt financing package led by J.P. Morgan (JPM) and Wells Fargo (WFC).

This deal makes sense for both companies in terms of trying to access international markets. Tim Hortons is the iconic coffee-maker in Canada, but is barely present in the United States. In the perspective of Burger King, the company can now utilize the resources that Tim Hortons will offer ranging from its coffee products to lunch specials, etc. in addition to the cheaper tax rate.

The merger of both firms will be able to position the new company in a very good way to rival the giants of McDonalds (MCD) and Yum! Brands (YUM). This deal will create the world's third largest quick-service restaurant company, with about $23 billion in system sales and more than 18,000 restaurants in 100 countries.

The two companies emphasized that each will continue to run as separate restaurants and continue to be run from their current home bases. This allows the companies to keep their respective “names” that they have tried so hard to build.

“Our combined size, international footprint and industry-leading growth trajectory will deliver superb value and opportunity for both Burger King and Tim Hortons shareholders, our dedicated employees, strong franchisees, and partners,” Mr. Behring said in a statement. “We have great respect for the Tim Hortons team and look forward to working together to realize the full potential of these two extraordinary businesses.”

The new combined forces of Burger King and Tim Hortons will be a significant force to be reckoned with in the fast-food industry. Although they have now combined forces, the question that investors should be asking is what will they be doing different to steer ahead of the pack in the fast-food industry.

We currently have Burger King as a Zacks Rank #3 (hold) due to recent earnings estimate revisions. But, with the newly announced news and the potential for lower taxes, investors should be watching closely to see how the recent moves impact the Zacks Rank.

Meanwhile, we currently have Tim Hortons as a Zacks Rank #3 (hold) due to a 50/50 split among analysts in their earnings estimate revisions. It is also important to note that the retail restaurants industry is currently in the bottom 30% of all industries, so regardless of the tax rate, the joint THI/BKW company will still have to fight for share in this ultra-competitive market.

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SHANGHAI (Reuters) -Cryptocurrency miners, including HashCow and BTC.TOP, have halted all or part of their China operations after Beijing intensified a crackdown on bitcoin mining and trading, hammering digital currencies amid heightened global regulatory scrutiny. It was the first time China's cabinet has targeted virtual currency mining, a sizable business in the world's second-biggest economy that some estimates say accounts for as much as 70% of the global crypto supply. Cryptocurrency exchange Huobi on Monday suspended both crypto-mining and some trading services to new clients from mainland China, adding it will instead focus on overseas businesses.

Reddit Traders Help Chinese Billionaire Exit AMC With Gain

(Bloomberg) -- Chinese billionaire Wang Jianlin’s Dalian Wanda Group Co. was facing headwinds on its AMC Entertainment Holdings Inc. investment as the movie chain was hit hard by the pandemic.Then the retail investor army from Reddit’s WallStreetBets forum stepped in, helping send AMC shares up as much as 839% in January.Wanda has taken advantage of the rally, cutting its stake to just 0.002% from 6.8% in an April 9 disclosure, according to a filing Friday. The company has gained about $675 million, including dividends, from its investment since 2012, according to a Bloomberg analysis.Wanda bought AMC in May 2012 and took the company public the following year. It started to trim its position from 2018 as the conglomerate, which had accumulated large debts after acquiring overseas trophy assets, contracted its investments outside China.AMC shares lost more than 70% of their value last year as the company struggled with the coronavirus pandemic. It considered options including a potential bankruptcy to ease its debt load, Bloomberg reported in October, citing people familiar with the matter.Then day traders who congregated on Reddit’s WallStreetBets forum gave AMC and Wang more room to breathe, inspiring a turnaround in the stock. While the company has fallen from its high in January, the stock has still jumped to $13.47 from $2.12 at the end of last year.The stock gained 12% as of 1:48 p.m. in New York on Monday as posters on a Reddit forum cheered on the news. ”The second coming is upon us! Been holding since January,” one Redditor wrote, while another posted “my AMC is green! Welcome back! Now to the moon please.” Despite the gain, Wang’s fortune has continued to decline and he’s now worth $9.2 billion, according to the Bloomberg Billionaires Index, down $5.9 billion this year.A spokesman for Wanda cited an earlier AMC statement saying the group’s film unit and AMC will enter into a long-term strategy and cooperation agreement.(Updates with Reddit traders activity in eighth paragraph)More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

First Warning Sign in Global Commodity Boom Flashes in China

(Bloomberg) -- One pillar of this year’s blistering commodities rally -- Chinese demand -- may be teetering.Beijing aced its economic recovery from the pandemic largely via an expansion in credit and a state-aided construction boom that sucked in raw materials from across the planet. Already the world’s biggest consumer, China spent $150 billion on crude oil, iron ore and copper ore alone in the first four months of 2021. Resurgent demand and rising prices mean that’s $36 billion more than the same period last year.With global commodities rising to record highs, Chinese government officials are trying to temper prices and reduce some of the speculative froth that’s driven markets. Wary of inflating asset bubbles, the People’s Bank of China has also been restricting the flow of money to the economy since last year, albeit gradually to avoid derailing growth. At the same time, funding for infrastructure projects has shown signs of slowing.Economic data for April suggest that both China’s economic expansion and its credit impulse -- new credit as a percentage of GDP -- may already have crested, putting the rally on a precarious footing. The most obvious impact of China’s deleveraging would fall on those metals keyed to real estate and infrastructure spending, from copper and aluminum, to steel and its main ingredient, iron ore.“Credit is a major driver for commodity prices, and we reckon prices peak when credit peaks,” said Alison Li, co-head of base metals research at Mysteel in Shanghai. “That refers to global credit, but Chinese credit accounts for a big part of it, especially when it comes to infrastructure and property investment.”But the impact of China’s credit pullback could ripple far and wide, threatening the rally in global oil prices and even China’s crop markets. And while tighter money supply hasn’t stopped many metals hitting eye-popping levels in recent weeks, some, like copper, are already seeing consumers shying away from higher prices.“The slowdown in credit will have a negative impact on China’s demand for commodities,” said Hao Zhou, senior emerging markets economist at Commerzbank AG. “So far, property and infrastructure investments haven’t shown an obvious deceleration. But they are likely to trend lower in the second half of this year.”A lag between the withdrawal of credit and stimulus from the economy and its impact on China’s raw material purchases may mean that markets haven’t yet peaked. However, its companies may eventually soften imports due to tighter credit conditions, which means the direction of the global commodity market will hinge on how much the recovery in economies including the U.S. and Europe can continue to drive prices higher.Some sectors have seen policy push an expansion in capacity, such as Beijing’s move to grow the country’s crude oil refining and copper smelting industries. Purchases of the materials needed for production in those sectors may continue to see gains although at a slower pace.One example of slowing purchases is likely to be in refined copper, said Mysteel’s Li. The premium paid for the metal at the port of Yangshan has already hit a four-year low in a sign of waning demand, and imports are likely to fall this year, she said.At the same time, the rally in copper prices probably still has a few months to run, according to a recent note from Citigroup Inc., citing the lag between peak credit and peak demand. From around $9,850 a ton now, the bank expects copper to reach $12,200 by September.It’s a dynamic that’s also playing out in ferrous metals markets.“We’re still at an early phase of tightening in terms of money reaching projects,” said Tomas Gutierrez, an analyst at Kallanish Commodities Ltd. “Iron ore demand reacts with a lag of several months to tightening. Steel demand is still around record highs on the back of the economic recovery and ongoing investments, but is likely to pull back slightly by the end of the year.”For agriculture, credit tightening may only affect China’s soaring crop imports around the margins, said Ma Wenfeng, an analyst at Beijing Orient Agribusiness Consultant Co. Less cash in the system could soften domestic prices by curbing speculation, which may in turn reduce the small proportion of imports handled by private firms, he said.The wider trend is for China’s state-owned giants to keep importing grains to cover the nation’s domestic shortfall, to replenish state reserves and to meet trade deal obligations with the U.S.No DisasterMore broadly, Beijing’s policy tightening doesn’t spell disaster for commodities bulls. For one, the authorities are unlikely to accelerate deleveraging from this point, according the latest comments from the State Council, China’s cabinet.“Internal guidance from our macro department is that the country won’t tighten credit too much -- they just won’t loosen further,” said Harry Jiang, head of trading and research at Yonggang Resouces, a commodity trader in Shanghai. “We don’t have many concerns over credit tightening.”And in any case, raw materials markets are no longer almost entirely in thrall to Chinese demand.“In the past, the inflection point of industrial metal prices often coincides with that of China’s credit cycle,” said Larry Hu, chief China economist at Macquarie Group Ltd. “But that doesn’t mean it will be like that this time too, because the U.S. has unleashed much larger stimulus than China, and its demand is very strong.”Hu also pointed to caution among China’s leaders, who probably don’t want to risk choking off their much-admired recovery by sharp swings in policy.“I expect China’s property investment will slow down, but not by too much,” he said. “Infrastructure investment hasn’t changed too much in the past few years, and won’t this year either.”Additionally, China has been pumping up consumer spending as a lever for growth, and isn’t as reliant on infrastructure and property investment as it used to be, said Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong. The disruption to global commodities supply because of the pandemic is also a new factor that can support prices, he said.Other policy priorities, such as cutting steel production to make inroads on China’s climate pledges, or boosting the supply of energy products, whether domestically or via purchases from overseas, are other complicating factors when it comes to assessing import demand and prices for specific commodities, according to analysts.(Updates copper price in 11th paragraph.)More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

China Braces for $1.3 Trillion Maturity Wall as Defaults Surge

(Bloomberg) -- Even by the standards of a record-breaking global credit binge, China’s corporate bond tab stands out: $1.3 trillion of domestic debt payable in the next 12 months.That’s 30% more than what U.S. companies owe, 63% more than in all of Europe and enough money to buy Tesla Inc. twice over. What’s more, it’s all coming due at a time when Chinese borrowers are defaulting on onshore debt at an unprecedented pace.The combination has investors bracing for another turbulent stretch for the world’s second-largest credit market. It’s also underscoring the challenge for Chinese authorities as they work toward two conflicting goals: reducing moral hazard by allowing more defaults, and turning the domestic bond market into a more reliable source of long-term funding.While average corporate bond maturities have increased in the U.S., Europe and Japan in recent years, they’re getting shorter in China as defaults prompt investors to reduce risk. Domestic Chinese bonds issued in the first quarter had an average tenor of 3.02 years, down from 3.22 years for all of last year and on course for the shortest annual average since Fitch Ratings began compiling the data in 2016.“As credit risk increases, everyone wants to limit their exposure by investing in shorter maturities only,” said Iris Pang, chief economist for Greater China at ING Bank NV. “Issuers also want to sell shorter-dated bonds because as defaults rise, longer-dated bonds have even higher borrowing costs.”The move toward shorter maturities has coincided with a Chinese government campaign to instill more discipline in local credit markets, which have long been underpinned by implicit state guarantees. Investors are increasingly rethinking the widely held assumption that authorities will backstop big borrowers amid a string of missed payments by state-owned companies and a selloff in bonds issued by China Huarong Asset Management Co.The country’s onshore defaults have swelled from negligible levels in 2016 to exceed 100 billion yuan ($15.5 billion) for four straight years. That milestone was reached again last month, putting defaults on track for another record annual high.The resulting preference for shorter-dated bonds has exacerbated one of China’s structural challenges: a dearth of long-term institutional money. Even before authorities began allowing more defaults, short-term investments including banks’ wealth management products played an outsized role.Social security funds and insurance firms are the main providers of long-term funding in China, but their presence in the bond market is limited, said Wu Zhaoyin, chief strategist at AVIC Trust Co., a financial firm. “It’s difficult to sell long-dated bonds in China because there is a lack of long-term capital,” Wu said.Chinese authorities have been taking steps to attract long-term investors, including foreign pension funds and university endowments. The government has in recent years scrapped some investment quotas and dismantled foreign ownership limits for life insurers, brokerages and fund managers.But even if those efforts gain traction, it’s not clear Chinese companies will embrace longer maturities. Many prefer selling short-dated bonds because they lack long-term capital management plans, according to Shen Meng, director at Chanson & Co., a Beijing-based boutique investment bank. That applies even for state-owned enterprises, whose senior managers typically get reshuffled by the government every three to five years, Shen said.The upshot is that China’s domestic credit market faces a near constant cycle of refinancing and repayment risk, which threatens to exacerbate volatility as defaults rise. A similar dynamic is also playing out in the offshore market, where maturities total $167 billion over the next 12 months.For ING’s Pang, the cycle is unlikely to change anytime soon. “It may last for another decade in China,” she said.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Battered Bitcoin claws back losses as oil rallies on recovery hopes

Consumer-related stocks helped tip London markets into the green, following two weeks of drops, helped by a weekend of Covid restrictions being eased. “It seems investors have had a good weekend and have realised how many other people have also been enjoying newly reinstated opportunities,” said Danni Hewson, financial analyst at AJ Bell. “From cinemas to restaurants, shops to bingo halls, real life has translated into share gains for companies like Primark owner Premier Foods, The Restaurant Group and the Rank Group.” The domestically-focused FTSE 250 index added 84.31 points to close at 22,483. Gambling company Rank Group led the leaderboard, rising 14.2p to 196.2p, followed by Mr Kipling’s parent Premier Foods, which gained 6p to 107.6p. Joining them in the top 10 was Frankie & Benny’s owner The Restaurant Group, which added 6.4p to 128.4p, as well as pub chain Wetherspoon. Similar types of blue-chip companies helped push the FTSE 100 to close in positive territory, though gains were tempered by miners which mostly fell after China’s commodity price warnings. Meanwhile, stocks globally struggled for momentum as investors awaited key US inflation readings for guidance on monetary policy. London’s benchmark FTSE 100 edged up 33.54 points to close at 7,051.59 Catering company Compass Group led the charge, up by 43p at £15.82. Gambling firms Entain and Flutter Entertainment also finished in the top 10, gaining 35.5p to £16.14 and 270p to £13.20 respectively. They were followed by hotel owners Intercontinental Hotels Group and Whitbread, which rose 98p to £49.22 and 59p to £31.50, respectively. Heavyweight oil stocks also performed well as oil prices extended Friday’s rally and climbed higher after Iran said that gaps remain in negotiations aimed at reaching a deal to end US sanctions on its crude. Iran said there are still differences around the timing of when countries will return to compliance with the original 2015 nuclear agreement, allaying some concern about a rapid ramp-up in the Persian Gulf nation’s output. While the market is anticipating the Islamic Republic’s supply will pick up again by late summer, the demand recovery will be strong enough to absorb it, according to Goldman Sachs. The bank expects Brent futures to hit $80 (£57) a barrel in the next few months. Royal Dutch Shell added 10.4p to £13.50, while BP rose 4.2p to 316.4p. Dominating the bottom of the rankings and dragging on the index, however, were miners including Fresnillo, Antofagasta, BHP and Evraz. RBC also cut its price target on Chilean miner Antofagasta. Elsewhere among companies, shares of FTSE 250 software firm Kainos fell 25p to £13.87 despite saying its annual pre-tax profit more than doubled in an eleventh consecutive year of growth, surging 124pc to £57.1m in the year through March. Revenue grew by 31pc to £234.7m while booking rose 6pc.

Korea Consumer Confidence Hits 3-Year High as Recovery Quickens

(Bloomberg) -- South Korea’s consumer confidence strengthened to a high of almost three years in May, fueling optimism that the economy is on track for a strong recovery from the pandemic slump.The consumer sentiment index rose for a fifth straight month to reach 105.2, the highest since June 2018, the Bank of Korea said in a statement Tuesday. A reading above 100 indicates optimism outweighs pessimism.The improvement was driven by stronger-than-expected economic growth in the first quarter, a positive exports performance, progress in vaccinations and better jobs data, according to the central bank.Alongside a 53% surge in exports so far this month, the stronger sentiment reading will likely figure among recent data the BOK board will review Thursday for its rate decision and growth projections. All economists surveyed see the BOK keeping its main rate on hold. Most of them also expect a significant upgrade to the current forecast for a 3% expansion this year.Korea has so far staged an export-led recovery, but rising confidence bodes well for private consumption amid signs of an uptick.Among the components of the headline index, households’ assessment of the current economy contributed most to the increase, followed by their views on the economy and spending going forward.Households’ inflation expectations for the next 12 months edged up to 2.2%, a two-year high. Their outlook for interest rates reached 118, the strongest since early 2019, indicating that more people expect rates to go up than down.The survey of 2,298 households was conducted May 10-14.More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

Fed's Brainard says central bank stepping up exploration of digital dollar

(Reuters) -Growing digital currency options could lead to a "fragmentation" of the payment system that poses financial risks for households and businesses, Federal Reserve Governor Lael Brainard said on Monday in a speech that outlined the major policy questions the Fed will need to address as it explores the potential development of a digital version of the U.S. dollar. As the holder of the world's reserve currency, the United States must be highly involved as digital payments become more common and other countries develop digital currencies that can be used to send money across borders, Brainard said. "The Federal Reserve is stepping up its research and public engagement on a digital version of the U.S. dollar," Brainard said in remarks made during a virtual conference organized by CoinDesk.

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Burger King’s Parent Agrees to Acquire Popeyes

OAKVILLE, Ontario, and ATLANTA -- Restaurant Brands International Inc., which owns the Burger King and Tim Hortons quick-service restaurant (QSR) brands has reached an agreement to acquire Popeyes Louisiana Kitchen Inc. for $79 per share in cash, or $1.8 billion.

Founded in New Orleans in 1972, Atlanta-based Popeyes is the franchisor and operator of Popeyes restaurants. It is one of the world's largest QSR chicken concepts with more than 2,600 restaurants in the United States and 25 other countries around the world. Its global footprint will complement RBI's existing portfolio of more than 20,000 restaurants in more than 100 countries and U.S. territories, which have more than $24 billion in system sales.

Popeyes will continue to be managed independently in the United States, the company said.

"Popeyes is a powerful brand with a rich Louisiana heritage,” said RBI CEO Daniel Schwartz. “With this transaction, RBI is adding a brand that has a distinctive position within a compelling segment and strong U.S. and international prospects for growth. As Popeyes becomes part of the RBI family, we believe we can deliver growth and opportunities for all of our stakeholders, including our valued employees and franchisees. We look forward to taking an already very strong brand and accelerating its pace of growth and opening new restaurants in the U.S. and around the world."

The transaction is subject to customary closing conditions, including receipt of certain regulatory approvals and receipt of a majority of Popeyes shares on a fully diluted basis in a tender offer to Popeyes' shareholders. Following the successful completion of the tender offer, RBI will acquire all remaining shares not tendered in the tender offer through a second-step merger at the same price. The companies said they expect the transaction to close by early April 2017.

Founded in 1954, the Burger King brand system operates more than 15,000 locations in more than 100 countries and U.S. territories. Almost 100% of Burger King restaurants are owned and operated by independent franchisees.

Tim Hortons, founded in 1964 by Canadian hockey player Tim Horton, offers a menu that includes coffee, specialty drinks, teas and smoothies fresh baked goods and sandwiches, wraps, soups, prepared foods and other food products. It has more than 4,600 restaurants in Canada, the United States and the Middle East.

Burger King and Tim Hortons merged in August 2014 and formed Oakville, Ontario-based RBI in December 2014.


Burger King parent aims for international growth

TORONTO — Restaurant Brands International, Inc. is living up to its name. The owner of restaurant chains Burger King, Popeyes and Tim Hortons has international expansion plans for all three brands, with Popeyes leading the way so far in 2021.

“At our investor day in May 2019, we shared our aspiration of growing to 40,000 restaurants within 8 to 10 years, and we remain committed to that aspiration despite a year of flat growth in 2020 because of COVID disruptions and our proactive strategic closure program,” said Jose E. Cil, chief executive officer of RBI, in an April 30 earnings call to discuss first-quarter results. “Foundational to our global growth strategy is unlocking the substantial opportunity to grow our brands in many countries where we're underpenetrated today versus our top competitors and that we attract stable, well-capitalized and experienced operators and investors in the QSR (quick-service restaurant) space to deliver on multiyear growth commitments in order to achieve that unlock.”

At the end of March, RBI had 27,173 restaurants, including 18,691 for Burger King, 4,987 for Tim Hortons and 3,495 for Popeyes.

The momentum of chicken sandwich sales has drawn international interest for Popeyes, Mr. Cil said.

“And it's led to important partnerships in the UK, in India, in Mexico, in Saudi, and we think it's just the beginning of the potential this brand has internationally,” he said.

The Popeyes brand in March entered into an agreement with JK Capital to bring hundreds of Popeyes restaurants to Mexico. Popeyes currently has a restaurant in Guadalajara, Mexico. The same month Popeyes and Jubilant Foodworks, Ltd. announced plans to open hundreds of Popeyes restaurants across India, Bangladesh, Nepal and Bhutan. On April 26, Popeyes and Gulf First Fast Food Co. announced a plan to develop the Popeyes brand in Saudi Arabia. Gulf First entered into an exclusive master franchise and development agreement for the territory.

The international business of Burger King doubled in size from 2012 to 2020, Mr. Cil said.

“But the reality is we still have a ton of room for growth in many of the markets where we made up ground versus our competitors over the last eight years,” he said. “China, France, Spain, UK, Germany, Brazil, these are markets where we've seen tremendous growth, but we still have big opportunities for growth going forward, and we have great partners and great teams there to achieve that.”

Tim Hortons will expand in China.

“Our development teams continue to have meaningful conversations with strong operators and investors around the world, building our pipelines for future expansion,” Mr. Cil said. “A great example of how impactful these partnerships can become is Tim Hortons China. Along with our lead partner there, Cartesian Capital Group, we announced in the quarter an exciting new round of funding from existing investor, Tencent, and new investors, Sequoia Capital and Eastern Bell, to support opening more than 200 new Tim Hortons restaurants in China this year alone and upwards of 1,500 over the initial term of the agreement.”

Toronto-based Restaurant Brands International reported net income attributable to common shareholders of $179 million, or 59¢ per share on the common stock, in the quarter ended March 31, which was up 24% from $144 million, or 48¢ per share, in the previous year’s first quarter. Total revenues of $1.26 billion were up 2.9% from $1.23 billion.

Burger King posted comparable store sales growth of 0.7% in the quarter. Popeye’s had comparable store sales growth of 1.5%, and comparable store sales dropped 2.3% for Tim Hortons.

“There's no doubt that the biggest factor affecting our performance at Tims is the continued lockdown of a large majority of (Canada), significantly affecting mobility,” Mr. Cil said. “Americans are experiencing a very different path out of COVID than Canadians today. Canada continues to face strict lockdowns in much of the country, with mobility severely restricted. As we sit here today, Ontario, which is where nearly 40% of Canadians live and where nearly 50% of our restaurants exist, is in a mandatory stay-at-home order until at least May 20, and there's a real possibility of that being extended.”


The taste of Canada

Since it opened its first store in Hamilton, Ontario, 50 years ago, the coffee and doughnut chain Tim Hortons has captured Canadians’ collective imagination as much as it has taken over prime real estate – with more than 3,500 stores across the country.

It has inspired its own language: Timbits (the bits of doughnut pushed out to make the holes), a double-double (coffee with two creams and two sugars), a Timmy’s run (a coffee run).

Tim Hortons is named after a Canadian ice hockey player who was a partner in the company before dying in a car crash in 1974. Its ice hockey roots are reinforced in the chain’s ad campaigns and sponsorships – young Canadian hockey players wear jerseys sponsored by the company, and are called TimBits.

In 2009 the prime minister, Stephen Harper, skipped his speaking slot at the UN in favour of a tour of the Tim ­Hortons plant in Oakville, Ontario.

When news of the impending deal broke this week, Canada’s official opposition called a press conference in front of one of the company’s stores in Toronto.

In a diverse country that touches three oceans, Tim Hortons feels to many Canadians like the great common denominator. You can find one as easily in Toronto as in Alberta’s mining towns. It’s affordable. It’s comforting. It’s available. Sonya Bell in Toronto


Watch the video: Burger King plans expansion of Tim Hortons (December 2022).