Burger King Tim Hortons Merger, Future Third-Largest Quick Service Restaurant Company Globally, Will it Succeed Despite Tax Inversion?

Oct 26, 2014 11:57 PM EDT

Burger King Tim Hortons merger is yet another one of the fastfood chain deals that is soon to watch out for. But amidst Burger King's announcement that it's going to acquire the Canadian coffee and doughnut chain for $11 million in August, an effect has resulted to a stock surge in the US Treasury seeing the amalgamation impossible to happen.

The union of the two giant companies, Tim Hortons, a successful coffee and doughnut chain in Canada and Miami's Burger King is seen to benefit both the restaurant outlets. Tim Hortons has difficulty penetrating the US while Burger King's move to merge would cut off its US tax bill through tax inversion.

According to Huffington Post, Inversion will allow a US company to restructure in a country with lower tax rate. It is also possible through merger with a foreign company that will lessen its huge taxes by moving its revenues overseas with no need to disburse added US taxes.

During the inversion, the Miami-based company's corporate headquarters will be moved to Canada and Burger King would have lower federal tax rate. While the Burger King Tim Hortons merger is still under negotiation, the US Treasury has slashed out three out of eight tax-inversion deals while tighter US rules is imposed making the merger seem impossible o take place, Bloomberg says.

Brynn Winegard, a marketing expert at Winegard and Company states, beverage offerings play crucial role in food service. "If they're going to grow and cut taxes, Tim Hortons is a very strategic choice (for Burger King)."

With union of Burger King and Tim Hortons, the popular Canada coffee chain can expand internationally giving that Burger King occupies 13,667 restaurants in more than 95 countries and the U.S.

If the merger of the companies will happen, the combined corporation would be the third-largest quick service restaurant company in the world, with about $23 billion in system sales and more than 18,000 restaurants in 100 countries globally. This could raise a threat to the world's largest fastfood chain, McDonald's.


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