September 18, 2014

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Burger King buying Tim Hortons for about $11B

A Burger King sign and a Tim Hortons sign are displayed in Lower Sackville, Nova Scotia. (AP Photo/The Canadian Press, Andrew Vaughan)

A Burger King sign and a Tim Hortons sign are displayed in Lower Sackville, Nova Scotia. (AP Photo/The Canadian Press, Andrew Vaughan)

MIAMI (AP) — Burger King says it struck a deal to buy Tim Hortons Inc. for about $11 billion, a move that creates the world’s third-largest fast-food company and could accelerate the international expansion of the Canadian coffee and doughnut chain.

The corporate headquarters of the new company will be in Canada. The two brands will continue to be run as stand-alone chains, with Burger King still operating out of Miami.

Some analysts have suggested that Canada’s lower tax rates stand to benefit Burger King over time. But Burger King said that’s the not main motivation for the deal.

During a conference call with analysts and investors, Burger King Executive Chairman Alex Behring stressed that international growth possibilities are driving the deal. He noted that 3G Capital, the investment firm that owns a majority stake in Burger King, has turned the hamburger company into one of the fastest-growing chains since buying it in 2010. He said that experience will be applied to Tim Hortons.

“It’s not being driven by tax rates,” Behring said.

In recent years, more U.S. companies have acquired businesses in countries with lower tax rates, then moved their headquarters there. Such tax inversions have become the subject of criticism by President Barack Obama and Congress because they mean the loss of revenue for the U.S. government.

After the deal, which is expected to close by early next year, the new company would have about $23 billion in sales and more than 18,000 locations.

The tie-up could help Burger King and Tim Hortons pose a greater challenge to market leaders such as McDonald’s and Starbucks and reflects a desire by both companies to expand internationally. Burger King, which has nearly 14,000 locations, has been striking deals to open more locations in developing markets. The company sees plenty of room for growth internationally, given the more than 35,000 locations McDonald’s has around the world. Tim Hortons has more than 4,500 locations, mostly in Canada.

Back in the U.S., breakfast and coffee have been hot growth areas in the fast-food industry. Between 2007 and 2012, breakfast grew faster than any other segment in the restaurant industry at about 5 percent a year, according to market researcher Technomic. But it has long remained a weak spot for Burger King.

3G Capital will own about 51 percent of the new company. The firm, which has offices in Brazil and New York, has been slashing costs at Burger King since buying it in 2010. Last year, 3G teamed up with Warren Buffett’s Berkshire Hathaway to buy ketchup maker Heinz as well.

Berkshire Hathaway is also helping finance the Tim Hortons deal with $3 billion of preferred equity financing, but will not have a role in managing operations.

Under the deal, Burger King will pay $65.50 Canadian ($59.74) in cash and 0.8025 common shares of the new company for each Tim Hortons share. This represents total value per Tim Hortons share of $94.05 Canadian (US$85.79), based on Burger King’s Monday closing stock price. Alternatively, Tim Hortons shareholders may choose either all-cash or all stock in the new company.

Tim Hortons stock rose more than 10 percent in Tuesday premarket trading. Burger King’s shares fell slightly.


  • todd

    Awesome!!! Our tax system is AWESOME!!! So complex and oppressive that American coorporations rather purchase another coorp. and MOVE out of US than stay and pay. This happens every day.
    Let me make it simple for you entitled check collectors. You will receive less in mail because our Government has less to give you. Simplify the tax code for all. A flat tax across the board would be best.

    • Scout

      I agree BUT when you say a flat tax then EVERYONE should have to pay the flat tax.

    • B4CE

      Interesting that of the 70 formerly American companies that have reincorporated since 1980, more than half of them have done so since 2003. In other words, you guessed it! The exodus started under Republican President Bush according to the congressional Research Committee. Go figure!

      • Pablo Jones

        There have been 41 companies that have reincorporated in lower tax districts since 1982. Inversions became popular in the mid 90′s. Between 1995-2002 there were about 20 companies that moved out, but most didn’t merge with another company. The Republican congress banned the self-inversions in 2004, which basically stopped inversions until about 2009. There have been 22 deals like this since 2011. 15 have been announced for 2014, more than any previous year.

        http://www.bloomberg.com/quicktake/tax-inversion/

        • B4CE

          Thank you for backing up my point that this is not a new practice and that it indeed took off during the Bush years

          • Pablo Jones

            No it took off under Clinton, stopped under Bush, and started back up and accelerated under President Obama. Over half of all the deals going back 30 years have occurred under Obama.

          • Oneday67

            Dang. Pablo Jones owns you. When are you going to learn?

  • alreadyfedup1

    Comrade Brown is up to his OLD TRICKS. A year ago he and his brownshirts with the Obummer Administration had NO problem eliminating COAL fired power plants from existence. These plants HAD jobs and PAID TAXES. So what gives? These are the problems of the FAR LEFT. You can’t have it both ways comrade.

  • GreatRedeemer

    Tax inversion, the new way for companies to flee Americas taxes. Completing an inversion is just a function of filing the right paperwork. All the executives stay here, the plants and stores etc… They just pay their lower tax to Canada, leaving the U.S. with the tab.

    I also especially like that Buffet, Mr. 1% flat tax Obama supporter is in for a huge stake, in helping Burger King to have taxes their way.

    • SniperFire

      What ‘tab’ would that be? You sound as if you think executives, stores and plants in operation are some sort of burden. Economic activity creates wealth, not the taxes placed on it.

      • GreatRedeemer

        The Tab is , by operating in the U.S . and not paying all
        U.S taxes the infrastructure and services provided by the taxpayers is still provided regardless.
        Imagine this, a you would think U.S company operates cruise lines but inverted to Panama, one of their ships becomes distressed the
        U.S. Coast guard rescues them. Who’s infrastructure footed the bill ?

        • SniperFire

          Ah. Your argument is that Burger King’s ‘infrastructure’ cost to America is more than the wealth created from their daily economic activity of producing goods and services. Not even close.

  • Pablo Jones

    In the mind of an anti-business person –
    Let’s raise the corporate rate to 60%. That will really show those evil corporation that they need to pay their fair share.

    Now look those corporations are so greedy they are leaving so they don’t have to pay their fair share. Now look at them they are outsourcing and laying people off. Oh the nerve of that company it filed bankruptcy and went out of business just so it didn’t have to pay taxes. Now government doesn’t have enough tax money because people are unemployed and businesses have left, we need to raise taxes on businesses to make up for the loss. Hey now even more businesses are leaving, they are so greedy….

    There are reasons businesses are leaving, people (legislators) need to ask themselves why are they leaving and what can we do to keep them here. Punishing businesses just for being businesses will not create jobs or improve our economy.

  • golfingirl

    Burger King will soon become a Canadian company, with a majority owned by a Brazilian investment firm, and with assistance of the American billionaire Warren E. Buffett, who is in for $3B.

    Is it safe to say there will never be another American Union member eat at a Burger King?

    I mean, they say don’t but foreign cars, steel etc. But I bet they will still stuff their fat arses at a foreign burger joint.

  • HankKwah

    Demanding $15/hour for flipping burgers and mopping floors. Demanding that the big corporations pay their fair share. Raising taxes on them so they pay even more. Driving them out of the country with obamacare and ridiculous insurance and tax requirements.

    Is it better to have SOME taxes, and get more people off welfare and in a job so THEY PAY TAXES TOO, or just drive EVERYONE out, and go further into debt?

    Kind of a rhetorical question since the right wants people off welfare and working, and the left just wants to tax the rich white man and give the lower class all the welfare they can handle so they keep voting democrat.

  • SniperFire

    It is idiotic to tax corporations. They are tools for creating wealth. It is like taxing the carpenter’s hammer for each blow it takes. Tax the ensuing profits to those who receive the wealth the tool generates.

  • golfingirl

    Two options here….

    Either revised the tax code, or watch the exodus continue.

    There are no other choices.

    Those who don’t like “big” business can scream all they want.

    But guess what?…..they will all leave and turn a deaf ear to the President accusing them of being “unpatriotic.”

    The U.S. has the highest corporate tax rates in the developed world. This is a direct result of it.

    Change it….or they will all leave!

    Cancel the tee times to address the problem before it is too late, Mr. President!

  • Chan

    Darn you Obama!

  • JoyceEarly

    Always fresh just moved to never fresh or healthy!