The antitrust watchdog, the Competition and Markets Authority (CMA), approved the USD 19 billion Vodafone-Three UK deal on November 5 after accepting the companies’ claim that improved networks would boost competition and boost the economy.

The CMA further said the combined group’s network investment plan would drive competition in the long term, dropping its objection that a move from four to three networks could push up prices.

“We believe the merger is likely to boost competition in the UK mobile sector and should be allowed to proceed – but only if Vodafone and Three agree to implement our proposed measures,” the regulatory body stated.

The CMA angered Microsoft by outright blocking its USD 69 billion Activision Blizzard deal due to concerns about competition in the emerging cloud gaming market. Now the approval comes 18 months later.

Microsoft’s behavioural remedies, which included promises about how the combined company would conduct itself to preserve competition, were rejected at that time because they would be hard to keep an eye on.

A revised deal was approved by the increasingly isolated CMA after Microsoft objected to Britain being closed for business.

It agreed to behavioural remedies for the Vodafone-Three deal, giving telecoms regulator Ofcom the responsibility of monitoring pricing and investment commitments to allay its competition concerns. This is a shift in the regulator’s strategy.

In October 2024, Keir Starmer told a group of foreign investors that the CMA, which has been more involved in merger control since Britain’s exit from the European Union, and other regulators needed to take “growth as seriously as this room does.”

When the deal was announced in June 2023, Margherita Della Valle, the CEO of Vodafone, put growth at the forefront of her pitch, and that message resonated with her.

Recently, she asserted that “the UK’s economic growth ambitions and many aspects of our lives depend on good connectivity.”

In terms of 5G availability and download speeds, Britain ranks 22nd out of 25 European countries, offering some of the slowest mobile speeds in the continent, according to analytics firm OpenSignal.

Operators across Europe have argued that regulators’ focus on low prices has hurt investment and left its digital infrastructure trailing the United States and Asia, hampering the continent’s economies.

The four-to-three mergers that were allowed required the creation of challenger brands to keep prices low. The CMA’s latest action now marks the first time a major European market has allowed such a deal without structural remedies.

Instead, Vodafone and Three, Britain’s third and fourth operators respectively, committed to spending 11 billion pounds (USD 14 billion) on a 5G network that would serve 50 million customers, including the subscribers of Vodafone’s network sharing partner Virgin Media O2 (VM O2).

It also sold spectrum to VM O2, pledged to cap some tariffs and agreed to set contract terms for mobile virtual operators.

The CMA accepted that three stronger operators – Vodafone-Three, current market leader BT and VM O2 would provide enough competition to deliver a better service for customers.

Della Valle, however, said it was too soon to say if the group would keep both main brands and its Voxi and Smarty value brands.

Analyst Karen Egan at Enders Analysis told Reuters that the approval was the right outcome after Hong Kong’s Hutchison warned it was struggling to invest because it did not make a return on its capital.

“Three high-quality networks instead of four inferior ones will serve consumers and businesses better, and the industry can move away from the low returns, low investment cycle that has dogged it,” Egan said.

Vodafone will own 51% of the combined company and will have the option to buy the remainder after three years subject to certain conditions.

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It was also reported that the merger process will not affect the mechanism and dates of disbursement of insurance benefits to insurance or pension clients. Other processes, such as the progress of operations or transactions will also not be affected, as confirmed by the kingdom.

The merger between Public Pension Agency (PPA) and General Organisation for Social Insurance (GOSI) comes as a part of ongoing reforms and restructuring under the Vision 2030 project, revealed Saudi Finance Minister Mohammed Al-Jadaan. He also mentioned that the merger is expected to strengthen the pension fund’s financial status by boosting its performance and maximsing investment returns.

The cabinet also approved that the Royal Commission for AlUla joins the International Union for Conservation of Nature as an independent member. Additionally, the meeting also spoke about boosting bilateral ties and backing international and regional measures to make sure there is stability and security. This vision is in line with the important role Saudi Arabia has played in leadership and development in the country and the Muslim world.

During the same meeting, the cabinet ministers also reviewed the Saudi-sponsored peace declaration issued by senior scholars from both Islamabad and Kabul in Makkah, which plans to settle the Afghan crisis through negotiations and aims to reject all shapes and forms of violence and extremism.

Image credits: Arab News

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IFM Correspondent

October 14, 2014: CIMB Group Holdings Berhad, RHB Capital Berhad and Malaysia Building Society Berhad announced on October 9, 2014 that an application has been made to the country’s central bank seeking approval for its proposed three-way merger.

If approved, the combined entity will become South East Asia’s fourth largest commercial lender and Islamic bank.

Tengku Dato’ Zafrul Tengku Abdul Aziz, acting group chief executive, CIMB Group said, “We are extremely pleased to have been able to reach this stage in the process. This exercise will cement CIMB Group’s position amongst the top banks in ASEAN and bring a host of value creation opportunities for all our stakeholders. We are excited that we can now move forward and work towards seeking the necessary approvals to effect this merger.”

Kellee Kam, managing director, RHB Capital Group, said: “I am glad that we have been able to come this far in our negotiations in such short a time. This merger is a natural step in our growth story, enabling us to become a regional financial powerhouse via the merged entity. The task ahead for us now is to ensure that we meet all the expectations of our stakeholders, thereby creating new opportunities for our employees, enhanced services and product offerings for our customers, and increasing returns and value for our shareholders.”

Dato’ Ahmad Zaini bin Othman, president and CEO MBSB said, “The strategic rationale for the merger and the subsequent creation of a mega-Islamic bank is clear and we’re focused on getting this to the finish line. This move charts another significant milestone in the history of MBSB since its inception and we are happy to be part of this corporate exercise.”

The deal is expected to be completed in mid-2015.

Related Story: CIMB Group, RHB Capital and MBSB exploring a merger 

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August 28, 2014: Tim Hortons Inc. and Burger King Worldwide Inc. on Tuesday announced a definitive agreement under which the two companies will create a new global powerhouse in the quick service restaurant (QSR) sector. With approximately $23 billion in system sales, over 18,000 restaurants in 100 countries and two strong, thriving, independent brands, the new company will have an extensive international footprint and significant growth potential. The new global company will be based in Canada, the largest market of the combined entity.

Tim Hortons and Burger King each have strong franchisee networks and iconic brands. Following the closing of the transaction, each brand will be managed independently, while benefitting from global scale and reach and sharing of best practices that will come with common ownership by the new company.

Under the terms of the transaction, which has been unanimously approved by the Board of Directors of both companies, Tim Hortons shareholders will receive C$65.50 in cash and 0.8025 common shares of the new company per Tim Hortons share. Based on Burger King’s unaffected closing stock price as of August 22, 2014, this represents total value per Tim Hortons share of C$89.32 and based on Burger King’s closing stock price as of August 25, 2014, this represents total value per Tim Hortons share of C$94.05.  As an alternative to the default mixed transaction consideration described above, each Tim Hortons shareholder will have the ability to elect to instead receive, for each Tim Hortons share held, either (i) C$88.50 in cash; or (ii) 3.0879 common shares of the new company, in each case subject to pro ration.

The C$89.32 unaffected offer value represents a premium of 39% based on the volume weighted average price of Tim Hortons stock over the past 30 days ending Friday August 22, 2014, and a 30% premium based on Tim Hortons closing stock price on August 22, 2014. By receiving shares in the new parent company, Tim Hortons shareholders will have the opportunity to participate in the new company’s long-term value creation potential.

Alex Behring, Executive Chairman of Burger King and Managing Partner of 3G Capital, said, “By bringing together our two iconic companies under common ownership, we are creating a global QSR powerhouse. Our combined size, international footprint and industry-leading growth trajectory will deliver superb value and opportunity for both Burger King and Tim Hortons shareholders, our dedicated employees, strong franchisees and partners. We have great respect for the Tim Hortons team and look forward to working together to realise the full potential of these two extraordinary businesses.”

Marc Caira, President and CEO of Tim Hortons, said, “We are very proud of the great history of our organization and the progress we have achieved in creating value and delivering the ultimate experience for our guests. As an independent brand within the new company, this transaction will enable us to move more quickly and efficiently to bring Tim Hortons iconic Canadian brand to a new global customer base. At the same time, 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.”

Daniel Schwartz, CEO of Burger King, said, “Over the past four years, we have transformed Burger King into one of the fastest-growing and most profitable QSR businesses in the world, through successful international growth, a consistent focus on brand revitalisation and strong commitment to our franchisees. We are excited to build on this progress as we continue to expand Burger King around the world and look forward to working with and learning from Tim Hortons as we together create the world’s leading global restaurant business.”

Management and governance

At the time of closing, Alex Behring, Executive Chairman of Burger King and Managing Partner at 3G Capital, will lead the new global company as Executive Chairman and Director.

Marc Caira will be appointed Vice-Chairman and a Director, focused on overall group strategy and global business development.

Daniel Schwartz will become Group CEO of the new company, with overall day-to-day management and operational accountability. The new company’s board will include the current eight Burger King directors and three directors to be appointed by Tim Hortons, including Mr. Caira.

Mr. Caira and Mr. Schwartz will continue as Tim Hortons and Burger King CEOs, respectively, through the transition period, and additional executives in the new global company structure will be identified from Burger King and Tim Hortons during the transition period and announced at the time of closing. Both Burger King and Tim Hortons will continue to operate after the closing as standalone, independent brands, which leverage global shared services and best practices.

The current Tim Hortons headquarters in Oakville, Ontario, Canada will continue to be the global home of the Tim Hortons business.

Burger King’s current headquarters in Miami, Florida, US will continue to be the global home of the Burger King business.  It is expected that the shares of the new parent company will be listed on the New York Stock Exchange and the Toronto Stock Exchange.

Commitment to Canada

As part of its commitment to Canada, the new company will endorse the following principles:

• Tim Hortons will continue to manage its own operations, headquartered in Oakville, and continue its significant community involvement, including the Tim Horton Children’s Foundation, TimBits Minor Sports Program, Tim Hortons Coffee Partnership and its community, sustainability and charitable programs.
• This transaction will not change the way Tim Hortons works with its franchisees or its business model. There are no plans to change the rents, royalty structures, customer-facing programs, Franchise Advisory Board or the franchisee-facing operational resources Tim Hortons provides to support its franchisees in building their businesses.
• Likewise, there will be no changes to restaurant-level employment. The new company will rely heavily on the Tim Hortons talent pool to staff the new organisation at all levels of responsibility. As a result, the global company’s management and shared services operations will consist of a meaningful number of Canada-based executives.

Similarly, Burger King will continue to support and preserve its long-standing commitment to local communities and charitable causes in the United States, including the Burger King Scholars Program.

Long-term ownership and investing in brands

3G Capital will retain all of its investment in Burger King by converting its roughly 70% equity stake into equity of the new company. On a pro forma basis, 3G Capital is expected to own approximately 51% of the new company with the balance of the common shares to be held by current public shareholders of Burger King and Tim Hortons.

Financial highlights

The combination generates substantial value for shareholders of both companies and provides the opportunity for shareholders to participate in the new company’s long-term value creation potential.  In addition to meaningful revenue synergies created from accelerated international growth, the transaction is expected to achieve cost savings through leveraging the new company’s global scale and the sharing and implementation of best practices.

Structure and terms

Upon completion of the transaction, each outstanding common share of Tim Hortons will be converted into the right to receive C$65.50 in cash and 0.8025 of a common share of the new parent company, which is subject to the right of the holders of Tim Hortons common stock to make elections as noted above. Upon completion of the transaction, each outstanding common share of Burger King will be converted into 0.99 of a share of the parent company and 0.01 of a unit of a newly formed Ontario limited partnership controlled by the new parent company. However, holders of shares of Burger King common stock will be given the right to elect to receive only partnership units in lieu of common shares of the new parent company, subject to a limit on the maximum number of partnership units that can be issued.

Shares of the new parent company will be traded on the New York Stock Exchange and the Toronto Stock Exchange and units of the new partnership will be traded on the Toronto Stock Exchange. The partnership units will be convertible on a 1:1 basis into common shares of the new parent company. However, the units may not be exchanged for common shares for the first year following the closing of the transaction. Holders of partnership units will participate in the votes of shareholders of the new parent company on a pro-rata basis as though the units had been converted. 3G Capital has committed to elect to receive only partnership units.

The transaction is expected to be taxable, for US federal income tax purposes, to the shareholders of Burger King, other than with respect to the partnership units received by them in the transaction. The transaction is expected to be taxable to shareholders of Tim Hortons in the US and Canada.

Burger King has obtained commitments for $12.5 billion of financing to fund the cash portion of the transaction, including commitments for a $9.5 billion debt financing package led by JP Morgan and Wells Fargo. The obligation of JP Morgan and Wells Fargo to provide this committed debt financing is subject to a number of customary conditions, including execution and delivery of certain definitive documentation. It is expected that the debt financing for the transaction will consist of a $6.75 billion senior secured term loan B facility, a $500 million senior secured revolving credit facility and senior secured second-lien notes in the amount of $2.25 billion.

Berkshire Hathaway has committed $3 billion of preferred equity financing. Berkshire is simply a financing source and will not have any participation in the management and operation of the business.

The transaction is subject to customary closing conditions, including approval of Tim Hortons shareholders and receipt of certain antitrust and regulatory approvals in Canada and the US. Since 3G Capital already owns approximately 70% of the shares of Burger King and has committed to vote in favor of the combination, no shareholder vote is required of Burger King shareholders.

Further information regarding the transaction will be included in a joint information circular/statement to be mailed to the shareholders of both Tim Hortons and Burger King.  The Arrangement Agreement and Plan of Merger provide that Tim Hortons is subject to customary non-solicitation provisions.

Both companies’ boards of directors have unanimously determined that the proposed combination is in the best interests of their respective companies. Each of RBC Capital Markets and Citi has delivered a fairness opinion to the board of directors of Tim Hortons, and Lazard has delivered a fairness opinion to the board of directors of Burger King.

Advisors 

Lazard, J P Morgan and Wells Fargo served as financial advisors to Burger King. Kirkland & Ellis LLP, Davies Ward Phillips & Vineberg LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP served as legal counsel to Burger King.

Citi and RBC Capital Markets are serving as financial advisors to Tim Hortons. Wachtell, Lipton, Rosen & Katz and Osler, Hoskin & Harcourt LLP are serving as legal counsel to Tim Hortons.

Press Release

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