Burger King in talks to buy Tim Horton's

[Brian Lutz]

http://online.wsj.com/articles/burger-k ... 1408924294
http://mobile.reuters.com/article/idUSK ... 5?irpc=932

This so-called Tax Trade deal, if completed, would basically move Burger King's base of operations to Canada. Thus far, it sounds like the effect on operations would be fairly minimal. Then again, it's not like Burger King has exactly been thriving over the past couple of decades...

[storewanderer]

I like Tim Horton's but Burger King is just terrible and useless. This will probably help for some expansion of Tim Horton's.

I think Wendy's was a better fit for Tim Horton's.

[Alpha8472]

Tim Horton's actually is a decently run chain. Their coffee is good and their donuts are popular. There is a possibility that Burger King would make changes that would ruin Tim Horton's. Burger King is all about cutting costs, limiting menu choices, and squeezing the profit out of their operations.

I think that perhaps adding better coffee and donuts to Burger King might actually be an interesting idea. We could see BK/Tim Horton's combo stores.

Again, Burger King is bland. They cut their menu choices, eliminated complicated burgers, and cut out ingredients in order to save time and money. This makes most of their burgers boring. It will be interesting to see if politicians get involved and try to stop this merger. It is all about avoiding paying taxes. BK wants to evade paying taxes by becoming a Canadian company. There is a ton of money at stake, and that money pays the politicians in Washington. I think that we may see some kind of resistance. How far are the politicians willing to go?

[kr.abs.swy]

Alpha, your statement that this deal "is all about avoiding paying taxes" is very likely not correct. With respect, I really wish you would check your facts before you make such broad statements because they detract from the dialogue on this site. I don't doubt that taxes had something to do with this but there is probably more to this deal than taxes. The ability to sell more breakfast items at Burger Kings and the ability to leverage the combined companies' systems to save money for both companies likely had something to do with this. Frankly, this inversion is much less offensive than some of the others out there, because the combined Burger King-Tim Horton's actually would have a material level of operations in Canada. This isn't one of those deals where you open a PO Box in Ireland but have 90% of your executives in Florida.

Per The Wall Street Journal:
"The person said Mr. Buffett likely wouldn't have helped finance a cross-border transaction spurred purely by tax savings."
"Burger King's effective tax rate in 2013 was 27.5%, according to a company filing. That isn't much higher than the roughly 27% Tim Hortons and other Canadian companies pay."
"Since Tim Hortons is considered a Canadian icon, the deal makers felt regulators were more likely to approve the merger if the company was based in Canada, this person said."
"Planning to base the company in Canada in turn changed the tax picture for Berkshire, increasing what Berkshire would have to pay in U.S. taxes given American laws governing dividend income from foreign entities. If the deal goes through, Berkshire will end up paying taxes on its income from the preferred securities at the 35% U.S. corporate tax rate, rather than the 14%, after deductions, that an insurance company such as Berkshire would be liable for under the originally envisioned structure."

Per The New York Times:
"As Matt Levine of Bloomberg notes, proposed legislation to prevent corporate inversions would not be likely to interfere with a Tim Hortons-Burger King merger, because this deal would pass the test those laws require: that the company is really, substantively shifting the locus of its operations outside the United States for reasons beyond taxes. We can change the tax code, but we can’t prevent an American fast-food company from going global."

[marshd1000]

What I am wondering is what is going to happen to the Wendy's/Tim Horton's combos across Canada dating from the days that Wendy's owned them?

[reymann]

i can see burger king selling tim horton's coffee and try to go up against mcdonald's mccafes at their stores and do a massive u.s. expansion for tim horton's with a combined company

[Alpha8472]

Canada does not tax foreign earnings. That is a huge amount of money that Burger King can save in taxes overseas. The U.S. taxes foreign earnings. Getting out of paying taxes on foreign earnings is going to mean less tax money for the U.S. government.

The tax rate in Canada is about the same in Canada as it is in the U.S. however, since profits in overseas countries are not taxed, that is a huge amount of money that will be saved in all other countries outside of Canada.

The U.S. is an intrusive government. Unlike most countries, the U.S. not only taxes a company's earnings in the U.S. but also the earnings that it makes in all other countries around the world. Canada will only tax earnings that a company makes in Canada, but the earnings from the rest of the world will be untaxed. This could lead to a huge global expansion of Burger King in other emerging countries. For example, BK could greatly expand in China. China is the country with the biggest population. The people are earning more and more money which they can spend on fast food. All of those earnings if untaxed will be a huge source of profit for Burger King. Not only can there be an expansion of Burger King, but there can also be an expansion of Tim Horton's. Donuts and coffee is a market that the Chinese and other foreign countries may welcome. Starbucks is expanding worldwide, and Tim Horton's is one chain that can compete with Starbucks on coffee. The one thing that Starbucks avoids for the most part is donuts. They focus on coffee and ignore the donut business. Baked goods/donuts is an untapped market in some countries. There is potential for a huge expansion.

[storewanderer]

There is a real sense of pride among Canadians about Tim Horton's. I don't quite know how to describe it, but they really think of it as "their chain."

I think not being Canadian based would really hurt and it would be a pride buster for the people there, who do actually care.

I do not think we really care here where Burger King is based and if it is based in the USA, nor do I think we are proud of Burger King (more like embarrassed).

[Super S]

Gotta wonder what kind of backlash (in the U.S.) will result from Burger King moving their headquarters to Canada. When the chain is struggling as it is, it doesn't send a good message when a decision is made to move headquarters out of the country where they originated.

Due to a time crunch, a few days ago I reluctantly stopped at a Burger King for breakfast on my way to work, as it is the only fast food restaurant on the way I usually drive. I ordered two Croissanwiches, and as usual, they were extremely hot on the outside, to the point cheese was melted, but cold inside, made ahead of time and reheated. A shame because they are actually tasty if made fresh, but fresh food is something Burger King can't seem to get right. Meanwhile, most other chains have moved toward making most sandwiches to order, and the food tastes better as a result. Burger King is still stuck in a different era.

They frequently miss the mark in their advertising also. One good example was the creepy "king" commercials...