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Published: Monday, 8/25/2014 - Updated: 1 month ago

Burger King mulls Tim Hortons deal in tax-saving Canada move

BLOOMBERG NEWS
The combined business would have about $22 billion in sales and more than 18,000 restaurants in 100 countries, according to the statement. The combined business would have about $22 billion in sales and more than 18,000 restaurants in 100 countries, according to the statement.
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NEW YORK -- Burger King Worldwide Inc., the second-largest U.S. burger chain, is in talks to buy Tim Hortons Inc. and move its headquarters to Canada, becoming the latest American company seeking to relocate to a lower-tax country.

Burger King would create the world’s third-largest fast- food chain by merging with Canada’s bigger seller of coffee and doughnuts, the companies said in a statement. Canada’s corporate tax rate is 26.5 percent, compared with 40 percent in the U.S., according to audit, tax and advisory firm KPMG.

The deal threatens to renew debate over American companies shifting their headquarters internationally in search of a lower corporate tax bill. The trend drew criticism last month from President Barack Obama. His aides vowed that the administration would take action to curtail the practice.

3G Capital, which has a 70 percent stake in Burger King, would own the majority of the shares of the new company, according to the statement. The two chains will operate as standalone brands, the companies said.

The combined business would have about $22 billion in sales and more than 18,000 restaurants in 100 countries, according to the statement. The deal is subject to negotiation, and Burger King and Tim Hortons don’t plan to comment further until an agreement is reached or discussions are discontinued.

Inversion Surge

Between mid-June and late-July, when Obama began criticizing deals that cut taxes by relocating outside the U.S., at least five large American companies have announced plans to make such a move -- known as an “inversion.” That includes AbbVie Inc. and Medtronic Inc.

Since the start of 2012, at least 21 U.S. companies have announced or completed the deals, comprising almost half the total of 51 such transactions in the past three decades.

Tim Hortons, Canada’s biggest coffee merchant, has about 4,500 restaurants and has been expanding its product lines to boost sales. Tim Hortons, Canada’s biggest coffee merchant, has about 4,500 restaurants and has been expanding its product lines to boost sales.
ASSOCIATED PRESS Enlarge

Tim Hortons, Canada’s biggest coffee merchant, has about 4,500 restaurants and has been expanding its product lines to boost sales. The Oakville, Ontario-based company’s stock rose 2.8 percent to a record C$68.78 on Aug. 22, the most recent trading day. The restaurant operator posted results this month that beat estimates and said fiscal 2014 profit will top or be at the high end of its target range.

Earlier this month, Burger King reported that revenue fell 6.1 percent to $261.2 million in the second quarter. Same-store sales in the U.S. and Canada rose 0.4 percent. The company has been trying to introduce fewer new items to make its kitchens faster and less complex.

Burger King gained 15 percent to $31.25 at 7:52 a.m. in early trading in New York. The shares had advanced 19 percent this year through Aug. 22. Tim Hortons, which had climbed 11 percent this year before today, rose 3.2 percent to C$71 in Toronto.

Stock Debut

The plan to move to Canada follows Burger King’s debut on the New York Stock Exchange in 2012. The chain had been taken private in 2010 by 3G, a New York investment firm, which got $1.4 billion in cash from the public offering.

U.S. fast-food restaurants are struggling with shaky consumer confidence and steep competition, adding pressure to find ways to alleviate the burden. Burger King has been trying to draw customers with value deals, such as a two-sandwiches- for-$5 offer, as well as some new limited-time fare including chicken fries.



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