• Bloomberg


Burger King Worldwide Inc. is negotiating to buy Canadian coffee and doughnut chain Tim Hortons Inc. and relocate its base to the U.S. neighbor, where corporate tax rates are lower.

Canada’s largest coffee merchant and the Miami-based burger chain majority owned by 3G Capital are in talks to form the world’s third-largest quick-service restaurant group, they said in a statement dated Aug. 24. 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’s website.

3G Capital will own the majority of the shares of the new company, with the remainder held by other shareholders of Tim Hortons and Burger King, which will operate as stand-alone brands, according to the statement. Deals by U.S. companies seeking to lower their corporate tax bill by acquiring overseas rivals drew criticism last month from President Barack Obama, and his aides vowed action to curtail the practice.

The combined company 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 won’t comment further until an agreement is reached or discussions are discontinued, they said in the statement.

Between mid-June and late-July, when Obama raised his criticism of the deals to cut taxes by relocating outside the U.S., at least five large American companies announced plans for “inversions,” including AbbVie Inc. and Medtronic Inc.

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

Representatives for neither Burger King nor Tim Hortons immediately responded to calls for comment.

Tim Hortons, Canada’s biggest coffee merchant, has about 4,500 restaurants and is expanding its product lines to boost sales. The Oakville, Ontario-based company’s stock rose 2.8 percent to a record $68.78 Canadian dollars on Aug. 22, the most recent trading day. The restaurant operator posted results earlier 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 rose 1 percent to $27.11 at the Aug. 22 close in New York. Burger King has gained 19 percent this year.

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