Warren Buffett has defended his involvement in a controversial tax inversion deal that will transfer Burger King's headquarters to Canada as part of its $11.4 billion (€8.64 billion) acquisition of coffee and doughnuts chain Tim Hortons.

Mr Buffett's conglomerate Berkshire Hathaway will provide $3 billion of financing to Burger King for the acquisition, it was announced yesterday.

Mr Buffett said Tim Hortons’ strong roots in Canada and limited presence in the US was the main reason for moving the combined company’s headquarters north of the border, not tax.

“Tim Hortons earns more money than Burger King does,” he said. “I just don’t know how the Canadians would feel about Tim Hortons moving to Florida. The main thing here is to make the Canadians happy.”

However, analysts at Credit Suisse said the deal appeared to be motivated by tax savings. “[An] intention to domicile in Canada should be a clear signal that the potential deal is about inversion more than anything else.”

Reopened debate

Even before yesterday’s announcement, news that Burger King was discussing such a deal had reopened the debate about those US companies who use deals to move their tax base elsewhere.

Sherrod Brown, senator for Ohio and a member of the Senate finance committee, said on Monday: “Burger King’s decision to abandon the United States means consumers should turn to Wendy’s Old Fashioned Hamburgers or White Castle sliders.”

3G Capital Management, the Brazilian private equity firm that took Burger King private in 2010 before relisting it, will retain 51 per cent of the combined group.

Mistake

Mr Buffett revealed that 3G offered him the chance to invest in Burger King at the time of its buyout in 2010, but he passed on the deal. “I didn’t do it, I made a mistake,” he said.

Berkshire Hathaway and 3G together own Heinz, the food group, and Mr Buffett reiterated that he wants to work in partnership with the private equity firm again.

Burger King said Hortons’ shareholders would receive C$65.50 (€45.40) in cash and 0.8025 shares in the combined business for each share they own. The offer represents a 30 per cent premium to Friday’s closing price.

Berkshire Hathaway’s taxes, at least, will be higher as a result of the inversion.

Dividends on its $3 billion of preferred stock will be taxed at 35 per cent rate for foreign dividends, rather than the 14 per cent rate that would prevail in the US, according to sources. – Copyright The Financial Times Ltd 2014