Fast food chain Burger King is in talks to buy Canadian coffee-and-doughnut chain Tim Hortons. According to reports, the deal would be structured as a so-called tax inversion, which would move Burger King’s headquarters to Canada.
If the deal goes ahead, the joint company would be worth in the region of $18 billion. The takeover would also create the third-largest quick-service restaurant chain in the world.
Inversion deals have been on the rise lately, however they often face criticism from consumers and U.S. government owing to the impact it has financially on the country. The proposed move by Burger King is likely to attract such criticism with it being a well-known and distinctly American brand.
By moving to a lower-tax jurisdiction, inversion deals enable companies to save money on foreign earnings and cash stowed abroad, and in some cases lower their overall corporate rate. Even though many of the headline-grabbing inversion deals of late have involved European companies, Canada has also been the focal point for a number of them, given its proximity and similarity to the U.S. Canada's federal corporate tax rate was lowered to 15 percent in 2012.
A Wealth of Combined Experience
Burger King was founded in 1954 with a single restaurant in Miami, where it is now based. Since its inception it has grown to be the world’s second-largest hamburger chain and today has 13,000 Burger King locations in nearly 100 countries. According to the company’s website, it serves more than 11 million customers on a daily basis.
Ontario based Tim Hortons, made a name for itself selling coffee and doughnuts. It’s boasts high-margin business line making it very attracted to quick-service restaurant chains. Burger King has been adding more coffee items and flavors to its menus to catch up with rival McDonald's, which has seen success with its coffee line called McCafe. It is believed Burger Kind and Tim Hortons would remain operating as two separate companies if the acquisition goes ahead.