Burger King is in talks to buy Canadian chain Tim Hortons, which sells coffee, doughnuts, and other breakfast fare. The deal being discussed would merge Burger King, the United States second largest burger chain, valued at $10 billion, with the Canadian doughnut chain, valued at $8 billion. Burger King would move its headquarters to Canada, most likely Ontario, where corporate taxes are much lower than in the United States.
If the deal goes through, the newly merged company would become the world’s third-biggest quick service restaurant company with more than 18,000 restaurants in 100 countries, the two companies said in a statement. The effective corporate tax rate in the United States, which combines national, state, and city tax rates, is nearly 40 percent. Canada’s, by comparison, is just over 26 percent. More than 70 U.S. companies have reincorporated overseas since the early 1980s. Many of those companies that moved their headquarters have been pharmaceutical firms.
In addition to the corporate tax issue, Burger King has been working to gain a greater share of the American breakfast market. Breakfast sales at fast-food chains have grown to more than $50 billion. In addition, breakfast was responsible for 90 percent of the industry’s growth from 2007 to 2012. Tim Hortons has more than twice as many stores per capita in Canada as McDonald’s has stateside, and the company has been looking to grow internationally. “A key driver of these discussions is the potential to leverage Burger King’s worldwide footprint and experience in global development to accelerate Tim Hortons growth in international markets,” the two companies said in their statement.