Making 100% on your money in a year is something that any investor would be proud of. Any investor that’s not Warren Buffett, that is. However, that pales before the return Berkshire Hathaway is set to make on Friday.
Berkshire Hathaway is poised to make nearly 354,000% on its money on Friday, December 12, 2014, when it exercises its right to purchase 8,438,225 common shares of Restaurant Brands International Inc. (QSR-WI) for a penny a share. The warrants came attached to 68,530,939 Class A 9.00% Cumulative Compounding Perpetual Preferred Shares.
As of December 12, 2014, Restaurant Brands’ shares were trading at $35.41 a share.
The paper profits come as a result of Berkshire Hathaway’s role in financing Burger King’s acquisition of Canadian restaurant chain Tim Hortons, and give Berkshire ownership and control over 4.18% of the outstanding Common Shares and 14.37% of the total number of votes attached to all outstanding voting shares of the Corporation.
Berkshire provided $3 billion in financing, which entitled the conglomerate to preferred stock paying 9% interest, and the right to buy up to 1.75% of the combined company for a penny a share.
After receiving shareholder approval on Tuesday, December, 9, 2014, the deal will close on Friday, December, 12, 2014. Berkshire has already announced its intention to exercise its warrants that will have a value of roughly $275 million.
The combined Burger King and Tim Hortons will have 18,000 restaurants in 100 countries. The total valuation will be $18 billion.
Berkshire is not expected to sell its new stake in Burger King. The shares will join a $100 billion portfolio of leading companies that includes Coca Cola, American Express, IBM, and Wells Fargo among others.
(This article was amended based on the closing price on December 12, 2014.)
© 2014 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.