Burger King eyes Tim Hortons for tax inversion deal

Burger King is working on a whopper of a business deal.

The burger chain is in talks with Canadian restaurant chain Tim Hortons about merging, a plan that, if accomplished, would create the world's third-largest fast food restaurant company, with more than 18,000 outlets in 100 countries and about $22 billion in system sales, the companies said in a statement.

Shares of Burger King (BKW) jumped 16% in pre-market trading on the news that the companies were looking to create a new, publicly traded company headquartered in Canada.

With a new base in Canada, Burger King, now based in Miami, could shave its U.S. tax bill. Tax inversions have become increasingly popular among U.S. companies trying to cut costs.

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. That money can be used to reinvest in the business or to fund dividends and buybacks, among other things.

Companies like AbbVie, a pharmaceutical with its headquarters just outside Chicago, have tied up with companies overseas to achieve that type of tax cut.

More recently, Walgreens, the huge drug store chain, backed away from such a plan under intense pressure in what is becoming an increasingly hot political issue.

The majority owner of Burger King, 3G Capital, would own the majority of shares of the new company if the deal goes through.

3G Capital acquired Burger King in 2010 and took it public again in 2012. The investment firm, known for its aggressive cost-cutting at companies it acquires, teamed with Berkshire Hathaway last year to take H.J. Heinz private in a $23 billion deal.

Tim Hortons (THI), best known for its doughnuts and coffee, was purchased by Wendy's International in 1995. In 2006 it completed an initial public offering and was spun off as a separate company.

The deal would also allow Tim Hortons to accelerate its growth in international markets. The company had 4,546 restaurants as of June 29, with 3,630 in Canada, 866 in the U.S. and 50 in the Persian Gulf area.

The companies say Burger King Worldwide and Tim Hortons, based in Ontario, would continue to operate as separate brands but would share corporate services.

The Wall Street Journal first reported the talks and that the companies say there's no assurance a deal will happen.

Burger King's stock surged $4.39, or 16%, to $31.50 before the market open on Monday. Tim Hortons' stock was up about 15% to $72.00.

Contributing: The Associated Press


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