26 | LEXPERT • June 2015 | www.lexpert.ca/usguide-corporate/
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EXCHANGEABLE SHARE STRUCTURES
THE MOST TALKED-ABOUT Canadian deal of 2014 was Burger King's
acquisition of Tim Hortons. This deal made headlines because of its size, its iconic players and the
mark that the combined Canadian company, Restaurant Brands International (now commonly
referred to by its ticker symbol QSR), would make in the global quick-service restaurant industry.
Much of the buzz centered on the complexity and novelty of the structure. To make the struc-
ture work, the Burger King deal team reinvented the conventional exchangeable share structure.
The Exchangeable "Up-C" Combo: A Fresh Look at the Traditional Canadian Structure
Under the merger agreement, Burger King's stockholders could elect to exchange their stock
for exchangeable units of Restaurant Brands International Partnership (Partnership), a publicly
traded Canadian partnership, rather than taking common shares of QSR, its public parent. Ex-
changing their stock for Partnership units afforded these holders a tax deferral of US capital
gains they would have otherwise triggered in exchanging stock for QSR shares. A similar tax
deferral is achieved by Canadian shareholders in a conventional exchangeable share structure.
However, in this case, it was the US, not the Canadian, shareholders who required a rollover.
To accomplish the rollover, the QSR structure combined elements of a conventional Canadian
exchangeable share structure with a US Up-C structure — a structure that has been used frequently
in the United States, in the initial public offering of companies that have historically operated as
partnerships or LLCs. In the Up-C structure, a new corporation that issues shares to the public is
created above the partnership and controls the partnership. The historical owners retain their part-
nership interests and receive special voting shares in the public corporation, which gives them vot-
Whopper of a Deal
with a Double-Double
Take on the Canadian
Exchangeable
Share Structure
Burger King's acquisition of Tim Hortons
relied on a reinvention of the conventional
exchangeable share structure
BY DAVID WILSON AND PATRICIA OLASKER;
DAVIES WARD PHILLIPS & VINEBERG LLP
