Burger King in talks to buy Tim Hortons
FILE - In a Saturday, Dec. 22, 2012 file photo, a customer purchases a meal at a Burger King restaurant in Marseille-Provence airport, in Marignane, France. Burger King is in talks to buy Tim Hortons in hopes of creating a new, publicly traded company with its headquarters in Canada. (AP Photo/Claude Paris, File)
FILE - In this Wednesday, July 22, 2009, file photo, a Tim Hortons coffee cup is seen in New York. The Canadian doughnut chain moved into 12 former Dunkin Donut locations earlier in the month, bringing new blood to the doughnut war in America's most competitive market. (AP Photo/Seth Wenig, File)
Burger King is in talks to buy doughnut chain Tim Hortons and create a new holding company headquartered in Canada, a move that could shave its tax bill.
Such an overseas shift, called a tax inversion, has become increasingly popular among U.S. companies and a hot political issue. Burger King was founded in 1954 with a single restaurant in Miami, where it is currently based.
Shares of Burger King and Tim Hortons both jumped 17 percent before the opening bell, heading toward all-time highs.
In a tax inversion, a U.S. company reorganizes in a country with a lower tax rate by acquiring or merging with a company there.
Inversions also allow companies to transfer money earned overseas to the parent company without paying additional U.S. taxes. That money can be used to reinvest in the business or to fund dividends and buybacks, among other things.
Companies like AbbVie, a pharmaceutical with its headquarters just outside Chicago, have tied up with companies overseas to achieve that type of tax cut. More recently, Walgreens backed away from such a plan under intense pressure and criticism at home.
Burger King and Tim Hortons cautioned Sunday that there was no guarantee a deal would happen, and it’s not clear exactly how much a tie-up would reduce Burger King’s tax costs.
But a recent report by KPMG found that total tax costs in Canada are 46.4 percent lower than in the United States.
The companies say Burger King Worldwide Inc. and Tim Hortons Inc., based in Ontario, would continue to operate as separate brands but would share corporate services. The talks were first reported by the Wall Street Journal.
The new company would have 18,000 restaurants in 100 countries with about $22 billion in sales, which the companies said would make it the world’s third-largest fast-food restaurant company.