By Graeme MacKay, The Hamilton Spectator – Tuesday August 26, 2014
Tim Hortons, Burger King shares surge on merger talk
Shares in Burger King and Tim Hortons have jumped dramatically in pre-market trading in New York on news the two companies are talking about joining forces.
It’s not know what such a deal would be worth, but both stocks surged with U.S.-based Burger King up 16.2 per cent to US$27.11. Shares in Tim Hortons jumped 16.96 per cent to US$62.84.
If Burger King joins forces with Tim Hortons, the new publicly traded company would be based in Canada and would have tax advantages for the U.S.-based burger chain.
Burger King would be able to shave its American tax bill in what’s called a tax inversion, something that has 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, Walgreen, the huge retail chain, backed away from such a plan under intense pressure in what is becoming an increasingly hot political issue in the United States.
Under a deal between Burger King and Tim Hortons, 3G Capital, the majority owner of Burger King, would continue to own the majority of the shares of the new company on a pro forma basis, with the remainder held by existing shareholders of Tim Hortons and Burger King.
Both companies have confirmed they are talking and have said Oakville, Ont.-based Tim Hortons and Miami-based Burger King would operate as standalone brands, if the deal goes ahead. (Source: Global News)
Editorial Cartoon, Business, Canada, Tim Hortons, Burger King, merger, corporation, taxes