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Burger King to Buy Tim Hortons ?

tomahawk6

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This is a new one on me.Buy another company to reduce taxes.Sounds like a solid acquisition.

http://finance.yahoo.com/news/burger-king-talks-buy-tim-hortons-wsj-002851192--finance.html

NEW YORK/TORONTO (Reuters) - Burger King is in talks to acquire Canadian coffee and doughnut chain Tim Hortons Inc in a deal that would create a fast food powerhouse with a market capitalization of roughly $18 billion.

Burger King and Tim Hortons, comparable in size by market value, confirmed their merger discussions late on Sunday, saying the new company would be the world's third-largest quick service restaurant. It would be based in Canada, which has lower overall corporate taxes than the United States, especially for entities that have large amounts of earnings from overseas
 
Burger king gets teh lower tax rate and can compete with McD's coffee expansion and Timmies gets to expand its coffee Imperium through BK.

Looks like a win win.

 
I would have said they can have Timmies and good riddance.....but their new dark roast coffee is actually palatable -- almost as good as McDs.  :nod:
 
Journeyman said:
I would have said they can have Timmies and good riddance.....but their new dark roast coffee is actually palatable -- almost as good as McDs.  :nod:

And a video on Timmies "dark roast."

https://www.youtube.com/watch?v=LBG_tEDPEUQ

https://www.youtube.com/watch?v=qIKD4wkjlrM

Just came back from a taste test of the "new dark roast." Still not up to McD's.
 
Hmm I wonder if this is a Leyland-Landrover type merger? Burger and other traditional burger joint food sales are continuing a long and steady decline. Timmes is well placed with proven brand, good pricepoint and well rounded menu to absorb market changes and mean competitive. My fear is that BK will look at Timmes to provide cash flow to fill in the money pit. Same thing happened to Landrover, they made a profit, Leyland used that money to prop up other failing brands rather than re-invest into Landrover, costing them long term market share.
 
It's got to do with how Obama is taxing big corporations.

It has been going on for some time. Since 2012 about 21 US companies have taken this route. That's almost 50% of the 51 companies that have done this 'inversion' in the last three decades. They do it to maximize their tax liabilities.

There is nothing illegal about buying and merging with a company not in the US, then relocating, the head office (and combined profits) to another country with lower tax liabilities.

However, Obama doesn't like it and says he's going to change the law and make the practice illegal, with, or without, the Senate or Congress. Many corporations are starting to fear his newly minted Emperor persona and are getting out of the States as fast as they can before he proclaims his law and they are stuck. Since he made the announcement, 5 companies have stated their intentions, between mid June to early July, of doing an inversion.

The more I look across the border, the more I am seeing a shocking parallel to Ayn Rand's Atlas Shrugged.
 
recceguy said:
However, Obama doesn't like it and says he's going to change the law and make the practice illegal, with, or without, the Senate or Congress. Many corporations are starting to fear his newly minted Emperor persona and are getting out of the States as fast as they can before he proclaims his law and they are stuck. Since he made the announcement, 5 companies have stated their intentions, between mid June to early July, of doing an inversion.

The more I look across the border, the more I am seeing a shocking parallel to Ayn Rand's Atlas Shrugged.

What an idiot.  In trying to 'keep' American companies under his taxation thumb, he is going to drive out all the foreign companies who have put up shop and help to drive the American economy.  His higher education consisted in a Degree in Basket Weaving; right?
 
"Finally, there’s reputational risk. I wouldn’t be surprised to see someone in Washington call public hearings and ask CEOs of inverters and would-be inverters why they think it’s okay for them to remain U.S. citizens while their companies renounce citizenship. Imagine the reaction! And the punitive legislation it could spark."

More info in the full article. Accurate analysis of why the US government is loosing significant revenue.

http://fortune.com/2014/07/07/taxes-offshore-dodge/
 
Baden Guy said:
"Finally, there’s reputational risk. I wouldn’t be surprised to see someone in Washington call public hearings and ask CEOs of inverters and would-be inverters why they think it’s okay for them to remain U.S. citizens while their companies renounce citizenship. Imagine the reaction! And the punitive legislation it could spark."

More info in the full article. Accurate analysis of why the US government is loosing significant revenue.

http://fortune.com/2014/07/07/taxes-offshore-dodge/

People have citizenship.

Corporations are entities. They don't have citizenship. They are not people.

Typical playing to emotions of the ignorant.

Corporations that make money are not ignorant, nor do they stay in a place where they cannot maximize their profits.

That's capitalism, plain and simple. What North America and the rest of the free world is built on.

What Obama, as his want, is suggesting is communism. Full stop.
 
Ah, but the Roberts Court has deemed corporations to have religious faith, so it is a matter of time before they are given citizenship as well.

Aside from that, there may be another benefit to the financiers, if Burger King's financial history as an ATM for Wall Street is any indication. From 2012:

Burger King, the Cash Cow

http://www.nytimes.com/2012/06/23/opinion/nocera-burger-king-the-cash-cow.html?_r=0

Earlier this week, a well-known company went public in a complicated transaction that involved a handful of Wall Street sharpies and a mysterious investment vehicle called a SPAC. The company was Burger King.

Seriously.

If you are surprised to learn that the home of the Whopper — not to mention the bacon sundae — would find itself the subject of complex financial machinations, you shouldn’t be. Burger King has long been an enrichment scheme for clever financiers, who have sucked hundreds of millions of dollars out of it over the years. Maybe it will be different this time. Or maybe not.

Financial engineering has been part of the Burger King story for so long that it’s hard to believe there is still anything worth plucking from its carcass. “It’s been run as a cash cow for Wall Street,” said Bob Goldin, an executive vice president of Technomic, a food service consulting firm. Along the way it’s had 13 chief executives in 25 years, numerous strategy shifts and marketing campaigns — and has been constantly starved for cash. But, hey, the private equity guys got theirs. And isn’t that what really matters?

Burger King first became financial fodder in 1967 when it was bought by Pillsbury, which didn’t have a clue about how to run a restaurant chain. Then in 1988, a British company, Grand Metropolitan, initiated a hostile takeover and won Pillsbury. The new owners vowed to turn Burger King around.

It didn’t happen. Nine years later, Grand Met merged with Guinness to form Diageo, by which time Burger King’s role was well established. It shipped cash to headquarters, even as it lagged ever further behind McDonald’s.

Enter — ta-da! — private equity. In 2002, Goldman Sachs, along with two private equity firms, TGP and ... hmmm ... Bain Capital, teamed up to buy Burger King. This is exactly the kind of situation private equity firms like to trumpet: taking over a downtrodden company and nursing it back to health. And to get them their due, Burger King’s new owners did some good, stabilizing both the company and the franchisees, many of whom were in worse shape than Burger King itself.

But the private equity investors also cut themselves an incredibly sweet deal. Their $1.5 billion purchase price included only $210 million of their own money; the rest was borrowed. They immediately began taking out tens of millions of dollars in fees. Four years later, they took Burger King public. But, first, they rewarded themselves with a $448 million dividend. In all, according to The Wall Street Journal, “the firms received $511 million in dividend, fees, expense reimbursements and interest” — while still retaining a 76 percent stake.

Does it need to be said that Burger King was soon back to its old struggling self? Or that the solution, once again, was to sell to another private equity firm? Of course not! In 2010, Bain, Goldman and TPG cashed out, selling Burger King to 3G Capital, for $3.3 billion. In sum, the original private equity troika reaped a fortune by selling a company that was in nearly as much trouble as it had been when they first bought it. Surely this represents the apotheosis of financial engineering.

What has 3G done? According to Howard Penney, the managing director at Hedgeye, it has prettied up the pig by laying off a large percentage of the staff in Burger King’s Miami headquarters. Burger King’s owners grew earnings, he said, “by cutting expenses. They have not improved the business one iota.” And, of course, 3G pulled out fees and dividends, too. In all, Penney wrote recently, private equity firms have taken for themselves “$1 billion or more in capital that could have been used to improve the company’s relative standing versus its competitors, many of whom Burger King struggles to keep up with.”

This latest deal is just as complicated as the ones that have come before. Three financiers, including William Ackman, the well-known shareholder activist, put together a special purpose acquisition company, or SPAC — a vehicle that allows them to raise money, buy a company and take it public without the hassle of an I.P.O. The SPAC then bought a stake in Burger King, though 3G is still in charge. On its first day of trading, Burger King had a market value of $3.3 billion. When you include its fees and dividends, 3G has already made a tidy sum on its original investment.

Ackman told me that the 3G guys are “the best operators around, bar none.” He sent me a presentation for investors that suggests that the owners are prepared to modernize the stores, expand abroad and make other moves that are necessary for Burger King to remain competitive.

For the sake of all the people whose livelihoods depend on Burger King, let’s hope that happens. And if it doesn’t? The financiers will still make money. They always do.
 
Burger King's majority owner is 3G Investment - a Venezuela firm if I remember correctly. To say that Burger King is a US company is not entirely correct.
 
ModlrMike said:
Burger King's majority owner is 3G Investment - a Venezuela firm if I remember correctly. To say that Burger King is a US company is not entirely correct.

You beat me to it.  Don't know why people are going nuts over this.  There was a time when Tim's and Wendy's were part of the same company.  As well speaking more to the point you just raised, how many large publicly traded companies are truly "American" or "Canadian" ?
 
ModlrMike said:
Burger King's majority owner is 3G Investment - a Venezuela Brazilian firm if I remember correctly. To say that Burger King is a US company is not entirely correct.

FTFY
 
I was going to write Brazillian... d'oh!

This deal says more about American politics and taxation than it does about business. If both companies were headquartered within the CONUS, then the story would be already over.
 
Myself like the odd Timmies and as long as their brandnames dont mix I'll be happy. As for BK myself and my family refuse after we witnessour "fresh" whoppers being pulled out of a Microwave.  When talking to the manager we were told it was cost effective during slow periods.  :boke:
 
I suspect that the end result will be something like when Wendy's had owned Tim Horton's. Aside from a few "half and half" type stores, there was no real indication there was any sort of merger, and certainly no synergy. In business terms this will be more like the Cara group, which owns Swiss Chalet and Harvey's (among others).

Taxation is the answer here. While they still have to pay outrageous US taxes on US income, they only have to pay Canadian taxes on their Canadian income, Mexican taxes on Mexican income and so on wherever they have operations.

Look for more US firms to jump ship, as well as investing their overseas incomes outside of the US (like Apple with its $35 billion dollar dragon's horde, which will never be repatriated to the US because of the tax implications).
 
Thucydides said:
I suspect that the end result will be something like when Wendy's had owned Tim Horton's. Aside from a few "half and half" type stores, there was no real indication there was any sort of merger, and certainly no synergy. In business terms this will be more like the Cara group, which owns Swiss Chalet and Harvey's (among others).

Taxation is the answer here. While they still have to pay outrageous US taxes on US income, they only have to pay Canadian taxes on their Canadian income, Mexican taxes on Mexican income and so on wherever they have operations.

Look for more US firms to jump ship, as well as investing their overseas incomes outside of the US (like Apple with its $35 billion dollar dragon's horde, which will never be repatriated to the US because of the tax implications).

One thing that has been pointed out, The Canadian entity can lend money to the US portion of the operation, and the interest payments can be used to essentially eliminate any US tax liability.

I can't really see anything different happening north of the border, but perhaps Tim's expansion in the US market will be a more likely prospect.
 
Interesting riff on the purchase of Tim Horton's by PJM:

http://pjmedia.com/blog/oh-canada/?singlepage=true

Oh, Canada!
Canada has quietly and politely become, well, more American than America.

by
Stephen Green

August 28, 2014 - 1:44 pm

Perhaps the strangest thing about Burger King’s “defection” to Canada is that the restaurant seemed vaguely Canadian for as long as I can remember. America vs Canada, McDonald’s vs Burger King — in each contest it’s an international icon pitted against a smaller, weaker neighbor struggling to nurture its own identity while lacking a clear rationale for its continued existence.

I kid, I kid. In fact, Americans could learn a lot from our neighbors to the north about how to be better Americans. Again.

Let’s start with Burger King, where a company from the country founded in a tax revolt is buying a Canadian fast food chain in order to become a Canadian corporate citizen so that it might, among other things, avoid American corporate taxes, which are the world’s highest and widest-reaching. The inversion is being financed by well-to-do Obama supporter Warren Buffett, and is being decried by left-leaning Americans of slightly more meager means. Some even call it “corporate treason,” even though corporations owe fealty only to their shareholders, who will most likely benefit from the deal.

So what’s this have to do with Canada, eh? I mean no insult to gentle Canadians who would be horrified by the thought, but Canada might have become, well, more American than America is. Leaving aside for the moment their sensible federal corporate tax of just 15%, Canada has been kicking our butt — politely, but still.

Mocking evil dictators has been an almost singularly American pastime, ever since the Three Stooges beat expatriate Englishman Charlie Chaplin to the anti-Hitler punch in 1940. Chaplin’s “The Great Dictator” might be the more famous of the two, but the Stooges released the short “You Nazty Spy!” almost two full months before Chaplin did. But today? Today we must go to Canada for the rich mocking Russian strongman Vladimir Putin so richly deserves.

Nicely done, Canada — but not too nice.

You want crazy, out-of-control politicians? America once gave you hard-drinking Louisiana Governor Earl Long, who ran for reelection while living in sin with a professional clothing removal engineer less than half his age. And he won. Can you imagine such a thing happening in 21st century America? Of course not.

But Canada has Rob Ford, the Toronto mayor who has been caught on video smoking crack, hired a violent criminal to coach high school football, and just generally surrounded himself with thugs, creeps, and criminals. And by at least one estimate, he is expected to win reelection.

Adding insult to injury, Ford had to come to our country for his rehab. Canada might not have much to be proud of in the person and career of Rob Ford, but we Americans should be filled with shame, or something like it, that he isn’t ours. Of all the things I never expected to have to get from foreign suppliers, it was electable drunks.

It’s probably just coincidence that all these things are taking place as Canada (quietly, politely) celebrates the 200th anniversary of the burning down of the White House in the War of 1812, during which proto-Canadian forces made easy work of the United States Army. At least I assume they’re doing so politely and quietly, because I’m not sure I want to ask.

Canada, please don’t burn down our White House again.

To top things off, while the American republic suffers a president who once made a habit of bowing down to kings, queens, assorted foreign dignitaries, and for all I know, smartly-pressed Post Office delivery persons, a quick Google Image Search turned up not one picture of Stephen Harper, the Conservative PM of a British Commonwealth, bowing down to anyone. Instead of bowing to kings, Canada went and poached ours.

Nice move, Canada. Would you mind if I moved in? I think I’d feel right at home, eh.
 
From Canada's Industry Minister:  it's approved!
"Burger King's application to acquire control of Tim Hortons has been approved.

"Foreign investment transactions are reviewed on their merits and the overall economic benefit for Canada.

"As a result of this review, Burger King has agreed to the following commitments:

- to work with Tim Hortons franchisees to maintain 100 percent of existing employment levels at Tim Hortons franchises across Canada;
- to expand Tim Hortons by opening new restaurants, both in the United States and globally, at a significantly greater pace than currently planned;
- to establish the headquarters of the new company (formed by Tim Hortons and Burger King) in Oakville, Ontario, to maintain significant employment levels at that facility and to list the company on the TSX;
- to manage Tim Hortons as a distinct brand, without co-branding of any locations in Canada or in the United States;
- to maintain the Canadian franchisee rent and royalty structure at current levels for a five-year period;
- to maintain 100 percent of Tim Hortons' current charitable work and involvement in communities across Canada; and
- to have Canadians comprise at least 50 percent of the membership of the Tim Hortons brand Board of Directors.

"The result of this transaction is this new global company, with sales of more than $23 billion annually, which will now be based in Canada. Our government is pleased to see companies like Burger King investing in Canada's economy and looking to benefit from our low taxes and open markets."
 
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