Burger King to Buy Tim Hortons as Part of Inversion Deal

Burger King Worldwide Inc. is in talks to buy Canadian coffee-and-doughnut chain Tim Hortons Inc. in a move that would relocate the hamburger seller’s headquarters to Canada.

The two are planning to create a new company. Should the deal be successful, the new entity will be the third-largest quick-service restaurant provider in the world.

Inversion deals have been on the rise in spite of intense criticism from Washington and this move by Burger King to execute one is sure to fan the flames. Together the companies are worth about $18 billion. A deal is expected to be sealed soon.

By reincorporating overseas, inversions enable companies to save money on foreign earnings and cash stowed abroad, while offering the ability to lower their overall corporate rate. Some American companies have looked to Europe, while others have an eye on Canada after the nation lowered its corporate tax rate to 15% in 2012.

One such company, Valeant Pharmaceuticals International Inc., which had been based in California, transferred its headquarters to Canada by means of an inversion and now enjoys a tax rate of less than 5%.

While the companies intend to operate the two as stand-alone brands, Tim Hortons’ is hoping Burger King’s expertise in global development will boost its international growth.

Source: Hoffman, Liz, “Burger King in Talks to Buy Tim Hortons in Canada Tax Deal,” The Wall Street Journal, August 24th, 2014