Scout Capital urges Tim Hortons to optimize capital structure

Tue Jun 25, 2013 9:49am EDT
 
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TORONTO, June 25 (Reuters) - U.S. hedge fund Scout Capital Management disclosed on Tuesday that it has sent a letter to Tim Hortons Inc's board urging the Canadian coffee and doughnut chain to optimize its capital structure and alter its approach to its U.S. expansion.

The demands by New York-based Scout Capital largely mirror those put forward to Tim Hortons' board by rival U.S. hedge fund Highfields Capital earlier this year.

In a letter to the board on Tuesday, Scout said it believes that the company's returns to shareholders can be dramatically improved, if it adjusts its capital structure and takes a more judicious approach to capital spending.

The fund said it believes Tim Hortons can double its free cash flow to C$4.50 per share by 2015, and push its share price into the C$90 to C$112 range.

Shares of Tim Hortons rose as much as 3.4 percent to C$56.40 in early trading on Tuesday - their highest level in nearly a month. (Reporting by Euan Rocha and Solarina Ho; Editing by Gerald E. McCormick)