Canadian Lawyer InHouse

DECEmBEr 2014 24 INHOUSE DECEmBEr 2014 24 '' '' lated to specifi c factors in terms of the way it is operated with important stakeholders — in addition to the shareholders — who have a lot invested in the success of the company. Horner points to BCE Inc. v. 1976 Deben- tureholders, where the Supreme Court said in 2008 that Canadian fi duciary duties in a change of control situation are different from what is found in the U.S., where the board's duties are to the shareholders. In Canada, the fi duciary duty is owed to the corporation but that means a series of stake- holders: "[i]n considering what is in the best interests of the corporation, directors may look to the interests of, inter alia, sharehold- ers, employees, creditors, consumers, gov- ernments and the environment to inform their decisions." "It doesn't mean the shareholders are necessarily paramount in that regard," says Horner. The agreement with Burger King in- cludes a series of arrangements that pertain to franchisees and the economic arrange- ments they have around personnel and the commitment of Tims to support the fran- chisees in the same way it has. A similar se- ries of commitments were made to the char- ities Tims supports and to Canada in terms of the new company that will own both Tims and Burger King being a Canadian company in the presence of Canadian ex- ecutives and shared services in Canada. The if we might get to a point that would allow us to agree to a transaction. Make no doubt about it, it's not going to be at $82.50." The agreed deal price was $88.50 but since the stock portion has risen in value since announcement of the deal Tims shareholders are in line to receive a mixture of cash and stock valued at over $97 as of late November." The increase in the value of the of- fer above $88.50 represents an additional $1.2 billion for Tim Hortons shareholders or seven billion Timbits (based on $8.49 for a box of 50). The transaction also took an interesting twist when the Tims board said even if they reached an acceptable price it would have some core principles they would want to see made part of the agreement and the ongoing enforceable obligation against Burger King in terms of how Tim Hortons would be oper- ated for a period of time. The board's strong belief was that success of the company is re- promises to those stakeholders was built into the deal by obliging Burger King to make those commitments part of the under- taking they provided to Investment Canada in order to get approval of the transaction. Investment Canada undertakings gen- erally run for three years and so most of the commitments run for that period, but the commitment that stipulates 3G won't change the economic deal with franchisees runs for fi ve years with a commitment that there are no current expectations to do so after the conclusion of the fi ve year period. "It is certainly the most extensive dis- cussion and consideration of a board of interests other than the shareholders and negotiation of protections for those other stakeholders," says Horner. As Sutton points out, the success of Tim Hortons is "absolutely dependent" on the success of the franchisees. "Their profi t- ability and our relationship with them is paramount to both our success," she says. "We are also very mindful of the culture we have created at Tims — the iconic brand — and our employees which we think bring this wonderful brand to life. This deal, at the end of the day, needed to provide a net benefi t to Canada overall as well. We believe the structure of the transaction addressed the full array of stakeholder interests. Af- ter closing, each brand will continue to be managed independently and maintain its respective headquarters, while benefi tting from global scale and sharing best practices that will come with common ownership by the new public company," says Sutton. Since the announcement of the transac- tion, the management of Tim Hortons and Burger King have spent a lot of time meet- ing with the franchisees and explaining it to them. Tims will be run as an indepen- dent company with its own management, values, and practices. They recognize what Tims does is different from what Burger King does and don't want to tamper with a successful formula. "From Burger King's point of view they say the real opportunity is to do something with Tims they have been able to do with Burger King which is to expand it dramati- cally internationally," says Horner. Canada is seen to be fairly satu- rated when it comes to expansion opportunities for Tim Hortons, but INHOUSE what Tims does is different from what what Tims does is different from what Burger King does and don't want to Burger King does and don't want to tamper with a successful formula. tamper with a successful formula. "From Burger King's point of view they say the real opportunity view they say the real opportunity is to do something with Tims they is to do something with Tims they have been able to do with Burger have been able to do with Burger King which is to expand it dramati- King which is to expand it dramati- cally internationally," says Horner. cally internationally," says Horner. Canada is seen to be fairly satu- rated when it comes to expansion opportunities for Tim Hortons, but From Burger King's point of view they say the real opportunity is to do something with Tims they have been able to do with Burger King which is to expand it dramatically internationally. CLAY HOrNEr, Osler Hoskin & Harcourt LLP

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