Tim Hortons Inc. has bowed to pressure from two influential shareholders and promises to purchase up to 10 per cent of its own shares in a $900 million stock buyback.

The iconic coffee and doughnuts chain made the announcement following the release of its quarterly results on Thursday. Tim's profit came in at $123.7 million, up more than 14 per cent from $108 million in the same period a year earlier. The company credited the profit gain to an increase in its Canadian operations, which offset a decline in its much smaller U.S. division.

That's something that two U.S. hedge funds have been complaining about. After quietly taking significant stakes in the company, U.S. hedge funds Scout Capital Management LLC and Highfields Capital Management have been pressuring the firm from behind the scenes for changes.

Chief among them is to pull back from their U.S. expansion plans, which are still unprofitable after more than a decade, and focus on its core strength in the Canadian marketplace.

The hedge funds had also been asking for a share buyback and dividend hike to boost the share price.

Thursday's announcement is a concession to that pressure, as Tim Hortons says it will borrow up up $900 million to finance the share buyback. Previously, the company had said it was open to buying back as much as $250 million of its own shares.