Dear Commons Community,
Burger King Worldwide Inc. is in talks to buy Canadian coffee-and-doughnut chain Tim Hortons Inc.,a deal that would be structured as a so-called tax inversion and move the hamburger seller’s base to Canada. In doing so, Burger King would join a number of other companies “gaming the system” to avoid paying taxes. As reported in The Wall Street Journal and The Huffington Post:
“The two sides are working on a deal that would create a new company, they said in a statement, confirming a report on the talks by The Wall Street Journal. The takeover would create the third-largest quick-service restaurant provider in the world, they said.
Inversion deals have been on the rise lately, and are facing stiff opposition in Washington given that they threaten to deplete U.S. government coffers. A move by Burger King to seal one is sure to intensify criticism of them, since it is such a well-known and distinctly American brand.
A person familiar with the matter said a deal between the two companies could be struck soon, though additional details on timing couldn’t be learned. Tim Hortons has a market value of about $8.4 billion, while Burger King’s is about $9.6 billion, so together the restaurant companies are currently worth about $18 billion.
By moving to a lower-tax jurisdiction, inversion deals enable companies to save money on foreign earnings and cash stowed abroad, and in some cases lower their overall corporate rate. Even though many of the headline-grabbing inversion deals of late have involved European companies, Canada has also been the focal point for a number of them, given its proximity and similarity to the U.S. Canada’s federal corporate tax rate was lowered to 15% in 2012.
Valeant Pharmaceuticals International Inc., which had been based in California, combined with Canada’s Biovail Corp. in 2010 and redomiciled in Canada. The company now has a tax rate less than 5%.”