Burger King in talks to buy Tim Hortons

By Michael J. de la Merced, New York Times News Service

Published: Sun, Aug. 24, 2014, 12:00 a.m. MDT

 A pedestrian walks past a Burger King restaurant near downtown Los Angeles.

A pedestrian walks past a Burger King restaurant near downtown Los Angeles.

(Nick Ut, Associated Press)

Burger King may be the home of the Whopper, but Canada may be the new home of Burger King.

The restaurant operator said on Sunday that it was in talks to buy Tim Hortons, the Canadian doughnut-and-coffee chain, in a potential deal that would create one of the world’s biggest fast-food businesses.

If completed, the deal would mean the burger giant’s corporate headquarters would move to Canada, raising the specter of yet another American company switching its national citizenship to lower its tax bill.

Under the expected terms of the deal, Burger King would create a new corporate parent that would house both chains, which would be operated independently. Together, the two companies would have a market value of more than $18 billion.

An agreement could be reached as soon as this week, a person briefed on the matter said.

Though the two companies are expected to argue that a merger would bring a host of strategic benefits, it would nevertheless count as a so-called corporate inversion. Inversions have become increasingly popular, though the practice has come under fire from Washington as the Obama administration and lawmakers have complained that companies that do so are unfairly — though legally — cutting their tax bills.

Though most of the companies that have used inversions are big drugmakers like AbbVie, which makes the arthritis drug Humira but isn’t a household name, Burger King would be one that is highly visible to consumers. A company in a similar position, the pharmacy chain Walgreen, cited potential pressure from Main Street and Washington as a factor in forgoing a corporate relocation.

The American corporate tax rate is about 35 percent, while Canada’s is about 15 percent. But people briefed on the deal negotiations said that the main driver in the talks was not taxes. Burger King already pays a tax rate of roughly 27 percent, and would shave off only a couple of percentage points by moving to Canada, according to the people briefed on the matter.

And Burger King does not have a significant amount of cash held abroad, these people said. Companies often pursue inversions to gain access to their overseas cash without being hit by a big American tax bill.

One potential reason for the move may be to placate Canadian authorities. Deals in the country are governed by the Investment Canada Act, which allows the national government to block a merger if it is deemed to not be in the best interests of the country.

1. liahona
Westbank, BC,
Aug. 24, 2014

Would not be happy if that happen - keep Tim's Canadian! Americanize it and it will never be the same and I think Canadians would revolt.

2. Hutterite
American Fork, UT,
Aug. 24, 2014

Timmys works as a Canadian original. It's too bad that BK might see Canada, socialist, health care loving Canada, as a tax haven. Not only do I fear for Tims, and I could use a double double right now, but I wonder if America wonders why the king wants to abdicate.

3. DVD
Taylorsville, 00,
Aug. 24, 2014

I thought Canada's corporate taxes were rising while ours are getting lower this coming year? That said, what would happen if I stacked a Horton's donut, cheese, a whopper burger patty, another donut, more cheese, another patty on top of a 3rd donut? Is that my heart pounding with love, or is it an impending cardiac arrest? Can my jaw stretch that wide or do I need to squish the monster a bit?

4. LeoHaugh
Huntsville, UT,
Aug. 25, 2014

Hate to break it to you, but Tim Horton's is in the states back east big time. Many locations are conjoined with Wendy's. Approximately 15 years ago Dave Thomas (creator of Wendy's) bought the Franchise rights. They do phenomenal business and there is no difference between the stores in Canada and say Michigan.

5. Baron Scarpia
Logan, UT,
Aug. 25, 2014

Mitt Romney was famous for inverting his companies off-shore... had he been president, he would be setting the example of what American shareholders needed to do to cut their taxes and preserve their wealth. Is America a great country or what?