Dallas, Texas 08/28/2014 (FINANCIALSTRENDS) – Burger King Worldwide Inc (NYSE:BKW) by acquiring Canada’s coffee shop chain, Tim Hortons (NYSE:THI) has crowned itself as the third largest fast food company in the world.
The deal which costs Burger King $12.5 billion, places it with consolidated market value of $23 billion.
But there is an inside-story to this Canadian acquisition.
Inside story: Tax Inversion
As is now the trend by most high income US companies, the need for tax inversion has led Burger King Worldwide Inc (NYSE:BKW) to move to greener, less-taxing regions of the world, which is with this particular deal closer home to Canada.
While some of the big names engaged in the tax-inversion exercise, namely Pfizer, have failed to overcome challenges of finding companies that can bring value, Burger King has had a smart run.
Burger King Worldwide Inc (NYSE:BKW) hopes to avoid making payment of higher taxes in the US and save money. Secondly, it will also save on the foreign earnings, besides hold cash away from US shores.
For Tim Hurtons’s this is a second US-buy
Interestingly, Canada’s top coffee shop buy by Burger King is a second foray from a US based company. Nearly a decade ago, Wendy International had bought Tim Hourton but had to spin-it-off via IPO in 2006, to overcome pressure from Nelson Peltz, activist investor.
The merger comes in a surprise.
Though there had been expectation that Burger King could well look at such options, given the drop in growth pace. But the surprise factor was the size of the company which Burger King chose to truck with, Tim Hurton.
However, management of Burger King did attempt to address the issue of tax inversion and deferred it, “like any other small business in the U.S., which pays its taxes.”