The Whopper and the Timbit have officially agreed to come together, with Burger King Worldwide Inc. announcing it has reached a deal to buy Tim Hortons Inc.

‘Americans are so chauvinistic. They tend to think, Oh, an American company bought or is merging with a smaller Canadian company. The reverse is true here’ Read on

The boards of directors of both companies have unanimously approved the acquisition, which would put the headquarters of the world’s third-largest fast food company in Canada. The terms of the $12.5-billion deal stipulate that Tim Hortons shareholders are to receive $65.50 in cash and 0.8025 common shares of the new company per Tim Hortons share.

Tim Hortons shares jumped more than 10% in pre-market trading Tuesday morning after surging to a new all-time high Monday after the companies confirmed they were in takeover talks.

The combined company would have US$23-billion in sales and more than 18,000 restaurants in 100 countries, according to the release announcing the agreement.

Under the deal, Burger King CEO Daniel Schwartz will become CEO of the new company. Tim Hortons President and CEO Marc Caira’s proposed new position is vice-chairman and director.

A press release announcing the merger of the American and Canadian fast food giants highlights the newly formed companys commitment to Canada. Read on

Alex Behring, who is currently Burger King’s executive chairman and managing partner at 3G Capital, the Brazilian private equity firm with a majority stake in Burger King, would become executive chairman and director and 3G would own about 51% of the new company, which is expected to list its shares on the Toronto Stock Exchange and the New York Stock Exchange.

Canadian Finance Minister Joe Oliver gave a muted response to the news, saying regulators would have to evaluate whether it would provide a net benefit to the country. Many observers have suggested the deal was motivated by a desire to take advantage of Canada’s lower corporate tax rate, although executives at both companies deny it.

“Canada has moved to a highly competitive tax regime,” Oliver told reporters after a meeting with technology executives. “We believe this has been a constructive move that is designed to retain capital in this country, which results in more business expansion and more employment.”

Mr. Caira reassured Tim Hortons’ loyal Canadian customers that the deal would help the brand grow and won’t make the coffee and doughnut chain unrecognizable.

“Our customers, employees, franchisees and fellow Canadians can all rest assured that Tim Hortons will still be Tim Hortons following this transaction, including our core values, employee and franchisee relationships, community support and fresh coffee,” Mr. Caira said in a statement.

The deal faced some backlash Monday from Canadian opposition politicians raising concerns about a beloved Canadian brand being acquired by an American fast food giant. To assuage those concerns, the release also put forward three “commitment to Canada” principles, assuring Canadians it will continue to manage its operations from Oakville, Ont. keep the franchise model unchanged and maintain employment levels at its restaurants.

Burger King plans to finance the deal with US$12.5-billion in loans, including a US$9.5-billion financing package led by JP Morgan and Wells Fargo and US$3-billion from Warren Buffetts Berkshire Hathaway.

Omaha, Nebraska-based Berkshire won’t participate in managing the restaurant business.

3G, which was co-founded by Brazilian billionaire Jorge Paulo Lemann, joined Buffett last year in a US$23.3 billion takeover of HJ Heinz Co. Buffett bought half the ketchup maker’s common stock for about US$4.25 billion and invested $8 billion for preferred shares that pay a 9% annual dividend and gave Berkshire warrants to buy an additional 5% stake.

“3G does a magnificent job of running businesses,” Buffett said in May at his company’s annual meeting in Omaha. “We’re very likely to partner with them, perhaps on some things that are very large.”