This was never a sexy investment, which is why it is likely paying off so well for Buffett — as things usually do.
— Jason Clampet
Warren Buffett’s cash pile is likely to get a bit bigger this week.
Burger King-owner Restaurant Brands International Inc. is scheduled to redeem $3 billion in preferred shares Tuesday from Buffett’s Berkshire Hathaway Inc. The money helped the fast-food chain finance its 2014 purchase of Tim Hortons.
The redemption will take away a lucrative investment for Berkshire and add to Buffett’s arsenal for investments and takeovers. At the end of the third quarter, Buffett’s Omaha, Nebraska-based holding company had a record $109 billion in cash. The billionaire has struggled some on the deal front this year with two large, potential acquisitions slipping away.
At the time Buffett made the preferred investment in Restaurant Brands, it was an attractive way to put some money to work. The securities pay 9 percent — or roughly $270 million — in dividends annually. The arrangement also reinforced a burgeoning relationship between Buffett and 3G Capital, the buyout shop that controls Restaurant Brands. Berkshire and 3G own a controlling stake in packaged-food giant Kraft Heinz Co.
Restaurant Brands executives said in October, when the company announced it planned to pay Buffett back, that the move would reduce debt payments and free up cash. The securities can be redeemed for a 9.9 percent premium, Berkshire said in a regulatory filing last month, so the cash inflow could be more than $3 billion.
Restaurant Brands agreed to purchase Popeyes Louisiana Kitchen earlier this year, adding the fried-chicken chain to its stable of brands. While Popeyes and Tim Hortons have struggled to maintain growth — a dispute with Canadian franchisees of Tim Hortons has hampered that operation — Burger King has posted strong results in recent quarters, even as a resurgence at McDonald’s Corp. adds to the competitive pressure in the U.S. fast-food industry.
©2017 Bloomberg L.P.