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Burger King said Tuesday it had agreed to buy Canada's coffee and donut chain Tim Hortons in an $11 billion deal that would create the world's third-largest fast food company.
The new company would be headquartered in Canada in a controversial tax inversion that provides a lower tax rate for the iconic American hamburger company that calls itself the "home of the whopper."
The deal, backed by legendary investor Warren Buffett, would launch a new company with about $23 billion in sales and more than 18,000 restaurants in 100 countries.
"By bringing together our two iconic companies under common ownership, we are creating a global QSR (quick-service restaurant) powerhouse," said Alex Behring, executive chairman of Burger King and managing partner of 3G Capital, Burger King's majority owner.
While the two brands would continue to operate independently, the combined company would have "significant growth potential," Burger King said.
Burger King agreed to pay about $11.4 billion (CAN$12.5 billion) in cash and stock for the Canadian chain.
Under the terms of the transaction, Brazilian-controlled 3G Capital will convert its roughly 70 percent equity stake in Burger King to a 51 percent shareholding in the new company.
The Miami-based Burger King said it had lined up $12.5 billion in financing for the cash portion of the deal.
Buffett's Berkshire Hathaway has pledged $3 billion of preferred share financing but will not participate in the management and operation of the business, it said.
The new company will be based in Canada, "the largest market of the combined company," it said.
Buffett could take flack for that because he has been outspoken in his position that the ultra-rich in the United States should pay more in taxes.
The deal is the latest in a wave of tax inversion deals in which a US company relocates its statutory headquarters outside the country to take advantage of lower tax rates.
US President Barack Obama and other top officials have strongly criticized tax inversions for eroding the country's tax base and weakening its finances. US Treasury Secretary Jacob Lew has called on Congress to amend tax laws to eliminate them.
The two companies' current combined market value is about $18 billion.
Daniel Schwartz, Burger King's chief executive, would be the CEO of the new company.
Schwartz said that the US firm was looking forward to "learning from Tim Hortons as we together create the world's leading global restaurant business."
Shares would be traded in New York and Toronto.
Burger King shares were up 0.4 percent at $32.54 and US-traded shares of Time Hortons surged 8.7 percent to $81.24 in opening trade.