MIAMI—Burger King Worldwide and Canada-based Tim Hortons Inc. confirmed late Sunday that they’re discussing a possible merger, following a report in the Wall Street Journal. The combination would create the world’s third-largest quick-service restaurant company, with a market value of more than $18 billion.
It would also result in a tax inversion, with the combined company shifting its global corporate offices to Oakville, Ont., where Tim Hortons has been headquartered since 2009. Canada’s corporate tax rate is 15% compared with 35% in the US, the New York Times reported, although Bloomberg reported Monday that Burger King’s effective tax rate for 2013 was 27.5%. Burger King would create a new corporate parent under which the two chains would operate as standalone brands.
3G Capital, which took Burger King private for $3.3 billion in 2010 and took it back to market in a $1.4-billion IPO two years later, would continue to own the majority of the shares of the new company on a pro forma basis. The remainder would be held by existing shareholders of Tim Hortons and Burger King.
Assuming the merger is consummated, the new company will have more than 18,000 restaurants in 100 countries worldwide and $22 billion in system sales. Much of that global reach is on the part of Burger King; most of Tim Hortons’ 4,300-plus donut-and-coffee stores are in Canada. A key driver of the merger discussions is the burger chain’s ability to leverage its worldwide footprint and experience in global development to accelerate Tim Hortons’ growth in international markets.
Such tax inversion deals have come in for criticism from the Obama administration recently. They have been uncommon in the retail sector, although a number of large firms, mainly in the pharmaceutical industry, have announced plans to do so in recent weeks.
Earlier this month, drugstore operator Walgreens nixed a possible headquarters relocation to Europe in its $6.7-billion acquisition of the remaining 55% of Alliance Boots GmbH it doesn’t already own. The holding company that would be formed as a result of the merger, Walgreens Boots Alliance Inc., would be headquartered in the Chicago area.