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 So Buffett's participation in fast-food chain Burger King Worldwide
Inc's purchase of coffee and doughnut chain Tim Hortons Inc –
complete with relocation of Burger King's domicile to Canada – might
at first blush raise questions about his patriotism.
Investors and tax experts say Miami-based Burger King's move to
Canada through a so-called tax inversion will help curb its U.S. tax
bill. Similar recent moves by other U.S. companies - mainly through
the purchase of European companies - have drawn the ire of President
Barack Obama, who suggested they are corporate deserters lacking
economic patriotism.
But analysts and investors say that the Burger King deal underlines
the market savvy that's helped him build his fortune more than
prompting questions about his commitment to the U.S.
"When Warren Buffett advocates investing in America, as I understand
it, that's because that's where the opportunities largely lie," said
Meyer Shields, managing director at investment bank Keefe, Bruyette
& Woods Inc. "Investing in America is actually the outcome of his
analysis instead of the beginning assumption."
Buffett's Berkshire Hathaway has committed $3 billion of preferred
equity for 3G Capital, which controls Burger King, to buy Tim
Hortons in a deal worth almost $12 billion. That should give him a
juicy return and a stake in any increase in value of the combined
entity.
Berkshire, a sprawling conglomerate with more than 80 companies and
a wide-ranging stock portfolio, will have no role in operating the
new entity.
Berkshire Hathaway and Buffett did not return calls requesting
comment.
Buffett tried to explain the reasons for the move to Canada in
comments to the Financial Times. "Tim Hortons earns more money than
Burger King does," he told the paper. "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."
NOT A DIME MORE
Buffett, the world's third richest person, has been clear in the
past on the question of corporate tax rates.
"Anybody who thinks corporate taxes are too high should look at a
chart of corporate taxes as a percentage of GDP since World War II,"
Buffett said at the annual Berkshire Hathaway stockholders' meeting
in Nebraska in May this year in reference to a big drop in that
level.
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He has also advocated higher tax rates for the ultra rich, noting
that his longtime secretary, Debbie Bosanek, pays a higher tax rate
than he does.
But for all that Buffett has defended the idea that corporations in
the U.S. see enviable profits, he's also been clear that it's not
his job to write any more checks to the government than necessary.
"I will not pay a dime more of individual taxes than I owe, and I
won't pay a dime more of corporate taxes than we owe," he told
Fortune magazine this year.
Berkshire's stock portfolio is stuffed full of iconic American
companies, such as Coca Cola and IBM. And the investment company
owns plenty of well-known names, as well, including Dairy Queen and
insurer Geico.
But in the criteria he's talked about over the years for why he buys
a company, such as the simplicity of a business, strong management
and earnings power, a U.S. headquarters does not factor.
Simply put, said Bill Smead, chief investment officer of Smead
Capital Management and a Berkshire investor, "Buffett is a
capitalist first and a patriot second."
(Reporting by Luciana Lopez; Edited by Martin Howell)
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