Burger King to Leave USA over Tax Rate -- Heading to CANADA!

MIAMI (AP) — Burger King says it struck a deal to buy Tim Hortons Inc. for about $11 billion, a move that would give the fast-food company a stronger foothold in the coffee and breakfast market.

The corporate headquarters of the new company will be in Canada, which stands to help lower Burger King’s taxes. Such tax inversions have been criticized by President Barack Obama and Congress because they mean a loss of tax revenue for the U.S. government. Burger King and Tim Hortons said the chains will continue to be run independently and that Burger King will still operate out of Miami.

Beyond any tax benefits, the tie-up could help each Burger King and Tim Hortons pose a greater challenge to market leaders such as McDonald’s and Starbucks. It also reflects a desire by both companies to expand internationally. Burger King, which has about 14,000 locations, has been striking deals to open more locations in developing markets. The company sees plenty of room for growth internationally, given the more than 35,000 locations McDonald’s has around the world. Tim Hortons has more than 4,500 locations, mostly in Canada.

Back in the U.S., breakfast and coffee have been hot growth areas in the fast-food industry. Between 2007 and 2012, breakfast grew faster than other segment in the restaurant industry at about 5 percent a year, according to market researcher Technomic. But it has long remained a weak spot for Burger King.

McDonald’s Corp. led the category with 31 percent of the market in 2012, while Burger King Worldwide Inc. had just 3 percent to 4 percent, according to Technomic. As newer players such as Taco Bell have pushed into the breakfast market, McDonald’s has said it plans to put more marketing muscle behind coffee as a way to get more customers in the door.

Under the deal, Burger King will pay $65.50 Canadian ($59.74) in cash and 0.8025 common shares of the new company for each Tim Hortons share. This represents total value per Tim Hortons share of $94.05 Canadian (US$85.79), based on Burger King’s Monday closing stock price. Alternatively, Tim Hortons shareholders may choose either all-cash or all stock in the new company.

Warren Buffett’s Berkshire Hathaway is helping finance the deal, but the companies said his company will not play a role in managing the business.

Tim Hortons stock rose more than 10 percent in Tuesday premarket trading. Burger King’s shares fell slightly.