Burger King is in talks to acquire Canadian coffee and doughnut chain Tim Hortons Inc. in hopes of forming a new, publicly traded company that would create a fast food powerhouse with a market capitalization of roughly $18 billion, the Associated Press reported. With majority of shares of the new company being owned by 3G Capital, the merger would establish the world's third-largest fast-food combine.
Burger King and Tim Hortons, comparable in size by market value, confirmed their merger discussions late on Sunday, saying the new company would be the world's third-largest quick service restaurant, Reuters reported.
Since tax inversions have become increasingly popular among U.S. companies trying to cut down costs, Burger King's new base in Canada, which has lower overall corporate taxes than the United States, especially for entities that have large amounts of earnings from overseas, could shave its U.S. tax bill.
"In an inversion, a U.S. company reorganizes in a country with a lower tax rate by acquiring or merging with a company there. Inversions allow companies to transfer money earned overseas to the parent company without paying additional U.S. taxes," according to the AP. "That money can be used to reinvest in the business or to fund dividends and buybacks, among other things."
Burger King's majority shareholder, 3G Capital, bought Burger King in 2010 for about $ 3.3 billion and took it public again on 2012, holding on to nearly 70 percent of the shares. The New York and Rio de Janeiro-based investment, known for aggressive cost-cutting at the companies it acquires, teamed with Berkshire Hathaway Inc. last year to take H.J. Heinz Co. private in a $23 billion deal.
If the deal goes ahead, Tim Hortons will be allowed to accelerate its growth in international markets, with the remaining shares being distributed between the current shareholders of Burger King and Tim Hortons.
According to reports, the companies will retain their separate brand identities but save costs by sharing corporate services, BBC News reported. Combined, Burger King and Tim Hortons would have an estimated revenue of $22 billion a year from around 18,000 restaurants in 100 countries.
Tim Hortons was purchased by Wendy's International Inc. in 1995. It completed an initial public offering in 2006 and was spun off as a separate company.
As of June 29, the company had 4,546 restaurants, with 3,630 in Canada, 866 in the U.S. and 50 in the Persian Gulf area.
