Over the last two to three weeks, one of the major stories was the purchase of Tim Horton's by Burger King. Under the new ownership structure, the new company will be a Canadian Corporation owned as follows: 3G Capital 51 %, Burger King 27% and Tim Horton's 22%. So, all current Tim Horton shareholders could combine to own 22% of the new formed company. I recently wrote a post about the possible purchase of Tim Horton's by Burger King . This post also tells you what choices the Tim Horton's investor have.
I recently sold my 100 shares in Tim Horton's in the last week. This buyout by Burger King is highly leveraged. So as I hear more and more people talk about this, I feel it would be better to sell the shares. For some reason the sale does not go through, the Tim Horton's stock price will drop probably in to the low $60's or high $50's. Currently, as Tim Horton's is near saturation in Canada, they are basically a "cash cow". I believe the cash from Tim Horton's will be used to help pay down the massive debt incurred to finance this transaction. With the cash going to pay down the debt, then the dividend, if any, with the new company will no grow quickly.
Purchase Price: $59.70
Commission on Purchase: $4.95
Sale Price : $89.25
Commission on Sale: $4.95
Total Dividends received: $96.00
Return = Profit/investment
= $3041.10 / ( $5970+$4.95)
= 50.90 %
I will continue to follow the news on the possible buy out of Tim Horton's by Burger King.