Tim Hortons Inc, the Canadian coffee and dougnut chain has been underfire lately from an investor with large shareholdings to undertake aggressive activities. This includes programs that boost returns through debt backed share buybacks and scaling back of US expansion plans. These were the plans seen in documents viewed by Reuters together with two individuals familiar with the matter.
The prime mover of the changes is hedge fund firm Highlands Capital. The firm owns about 1.5% of the company ans it is known as change makers in the companies that it invests in. Highlands wants Tim Hortons to obtain a loan worth US$3.4 billion in order to buy back one third of outstanding shares worth about US$59 per piece.
The moves of Highlands were not known beforehand and this is a clear indication that even healthy companies are vulnerable to activist investors that often try to force actions, call it financial engineering, in order to boost shareholder returns during times of economic doldrums.
This is another indication on how American activist investors are shaking up companies across the border that previously had no experience handling these kinds of investor activities.
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