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| You're right next door. |
The Canadian doughnut and coffee chain is being bought by the fast food giant in a bid to climb back from slumping sells. The slumping sells and the potential to move to Canada has the American junk food media wondering why would the company do such a thing!
Burger King dropped to the third most popular chain. McDonald's and Wendy's happen to continue to build their stock without having another anchor on their sacks.
I've always thought that Tim Horton's was a subsidiary of Wendy's. I guess I was wrong.
Okay, BK decided to shelve out $11.3 billion to buy the doughnut chain and may relocate to Canada.
The Washington Post reports that the newly merged company would become the world's third-biggest "quick service restaurant company," with more than 18,000 restaurants in 100 countries, said Burger King and Hortons in a statement Monday. The deal would create a business capable of rivaling Yum Brands, which owns Taco Bell and Pizza Hut, and is valued at more than $30 billion. But while Yum Brands operates from Louisville, KY, the new Burger King and Tim Hortons parent company would likely station itself in the Ontario province of Canada.
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| Bow to the King! |
On the surface, the reason for a headquarter shift across the country's northern border is simple: lower corporate taxes.
As we have have noted before, when a company reincorporates abroad, as the practice is known, what it's really doing is shifting its corporate citizenship; and when a company shifts its corporate citizenship, what it's really doing is trying to pay less in taxes. The nominal corporate tax rate in the U.S., which combines national, state, and city-level tax rates, is nearly 40 percent—the highest across all 34 Organization for Economic Cooperation and Development (OECD) member countries. Canada's, by comparison, is just over 26 percent.
Burger King would hardly be the first large American corporation to move its headquarters—more than 70 U.S. companies have reincorporated overseas since the early 1980s. The practice has been especially popular lately—more than half of those inversions have come since 2003, or almost double the amount that did in the twenty years prior, according to data from Congressional Research Service (CRS).
The Post added Burger King has been itching to gain a greater share of the coveted American breakfast market. Breakfast sales at fast food chains have swelled to more than $50 billion. They're also the industry's fastest growing segment—breakfast was responsible for 90 percent of the industry's growth between 2007 and 2012. Tim Hortons offers a particularly strong entry into both the U.S. and Canadian breakfast markets—the coffee chain has more than twice as many stores per capita in Canada than McDonald's has in the U.S..
Tim Hortons has also been been looking to grow internationally, a process which Burger King's global footprint might be able to help expedite. "A key driver of these discussions is the potential to leverage Burger King's worldwide footprint and experience in global development to accelerate Tim Hortons growth in international markets," the companies said in their statement.
Still, the reality that one of America's largest food companies is mulling a move to Canada--and in doing so, a move away from U.S. corporate tax rates--might not sit so well with some consumers. Shifty but legal tax maneuvers have proven unkind to food companies in the past. Starbucks saw its sales fall in the United Kingdom for the first time after it became clear the company was using complex accounting methods to lower its local tax payments.
Have it your way, eh!
What's your thoughts on Burger King merging with Tim Horton's?
Do you believe Burger King is right in its possible move to Canada?
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