Burger King may acquire Canadian coffee and doughnut chain Tim Hortons Inc. Known internationally as Tim Horton’s Café and Baker Shop, it holds the crown for Canada’s largest fast-food service. Tim Horton’s establishments have spread in waves, and eventually pulled past McDonald’s as Canada’s largest food service provider. At the end of last year, Hortons Inc. had 3.588 restaurants in Cannada, 859 in the United States and 38 in the Persian Gulf.
The deal would be constructed as a ‘tax inversion’ transaction. As a result, Burger King can establish a main headquarters in Canada and thereby pay lower corporate taxes. Tax inversion has been a popular financial maneuver lately. Walgreens elected not to accept a tax inversion deal in their acquisition of European pharmacy chain Alliance Boots. President Obama called the trend of tax inversion a “herd mentality” by several companies. Officials said that the majority owner of Burger King, 3G, will still own the majority of shares in the new agreement.
3G is a New York-based investment firm that bought the then-struggling fast-food chain Burger King in 2010 at $3.3B. They put it back on the market in 2012 but still own 70 per cent of the firm’s shares. Tim Hortons and Burger King will continue as separate brands while they both befit from sharing corporate services.
History proved to repeat itself; in 1995, Wendy’s International Inc. acquired Tim Hortons, but bailed from the Canadian brand in 2006 when the fast food chain faced a threatening level of pressure from Nelson Peltz, an activist investor.
The Canadian corporate tax rate has been 15 per cent since 2006, when Conservatives came in to power. Burger King, founded in 1954, operates over 13,000 locations in nearly 100 countries around the world. Tim Hortons and Burger King declined the opportunity to discuss the deal until a deal is agreed upon.
