Besides saving tax dollars, The King just moved up quite a bit in the global ranking of Fast Food Companies. BK seems prepared to survive the social media backlash and boycotts. It will be interesting to see what happens. Burger King claims it's not moving to Canada to evade taxes...yeah riiiight... If that's not true, why not say you are going to pay the taxes anyway and make the record of it available to the Amercian public...
From Huff Po: For years, Burger King has tried to take down the Big Mac with the Whopper, its own version of a deluxe burger. Now the long-suffering fast-food chain is going after McDonald's with two arguably more timeless classics: coffee and doughnuts.
On Tuesday, Burger King announced it would buy Canadian bakery and coffee chain Tim Hortons for $11.4 billion. Burger King is currently based in Miami, while Tim Hortons is headquartered in Oakville, Ontario. The headquarters of the combined, as-yet unnamed goliath will be in Toronto, although both Burger King and Tim Hortons will continue to operate from their current home cities.
With an estimated $23 billion in sales and 18,000 restaurants in 100 countries, the new entity is expected to be the third biggest fast-food chain by sales, behind McDonald's and Yum! Brands.
Customers and consumer advocates have sharply criticized the deal, saying it will allow Burger King to dodge paying U.S. taxes on overseas sales. While the fast-food chain will be able to cut a few percentage points on its overall corporate tax rate by leaving the U.S., Burger King executive chairman Alexandre Behring told investors on Tuesday that he expects overall tax expenses to remain "largely consistent" after the deal is completed.
"It's not being driven by tax rates," Behring said of the merger.
The deal is expected to strengthen Burger King's ability to compete in an industry that's displayed little momentum in recent years. McDonald's, in particular, has been struggling with flat and declining sales over the last few months. Cash-strapped customers have been turning away from traditional fast food, giving their money instead to upstarts like Chipotle and Panera.
"The [fast-food] market today is not a pretty sight," Darren Tristano, an executive vice president at the food research firm Technomic, told The Huffington Post before the deal was official.
The one bright spot in fast food: breakfast. By merging with a chain known for its coffee and pastry offerings, Burger King is hoping to benefit from the business of a greater number of morning customers -- a huge segment not yet fully conquered by traditional fast-food outlets. Currently, Burger King is competing with McDonald's, the leading fast-food chain in the breakfast space, as well as new entrants into the market like Taco Bell, which has seen big success with its recent launch of morning burritos and other items.
3G Capital, the Brazilian investment firm that controls Burger King, has so far pursued a strategy of cost cuts, shedding company-owned stores and cutting staff at its corporate headquarters. And it's worked. Burger King's stock price has more than doubled since the chain went public in 2012 .
So far, investors are happy with the strategy shift that the Tim Hortons deal signals. After the deal was made official Tuesday morning, Burger King's stock price climbed to $31.64, up about 16 percent from its closing price on Friday. Tim Hortons, which operates about 4,500 restaurants, likewise saw its stock price jump about 30 percent from Friday's closing figure.
"[The deal] gives them a chain with a concept that does some things that Burger King's competitors do really well," Dave Jenkins, a managing director at the food industry research firm Datassential, told HuffPost on Monday.
Still, it's the tax aspects of the deal that are getting the most scrutiny. The move makes Burger King the most prominent U.S. corporation to attempt a tax inversion -- a strategy that's become popular in recent years, wherein a larger company shifts its base to a smaller company's home country to take advantage of its lower tax rates.
In the U.S., companies pay up to a 35 percent rate on both domestic income and overseas sales, though the U.S. provides credits for taxes paid to foreign governments. Canada levies its federal corporate tax rate of 15 percent only on sales within its borders, then allows companies to pay only foreign taxes on sales abroad. This means that under Tuesday's deal, Burger King will still pay the same U.S. taxes on its sales here, but will only have to pay Canadian taxes on its Canadian sales, Mexican taxes on its Mexican sales and so on.
Burger King paid an effective corporate tax rate of just over 27 percent in the U.S. last year, according to regulatory filings.
Earlier this month, drugstore giant Walgreen Co. abandoned its plans to flee to Switzerland following threats of a national boycott and action from Democrats in Washington. Around that time, President Barack Obama called tax inversions "wrong" and said he may use an executive order to limit them.
Petitions to boycott Burger King proliferated on Monday, as tax advocates readied national campaigns against the fast-food company. Sen. Sherrod Brown (D-Ohio) called for a boycott, and Sen. Bernie Sanders (I-Vt.) said the move demonstrated Burger King's "contempt" for average Americans.
Besides the privileged tax status, there are other reasons for the new corporate entity to have its headquarters in Canada. The Canadian government has the power to block deals with Canadian brands if it doesn't view the move as being in the best interests of the country, The New York Times reported Monday.
The decision to allow Tim Hortons, an iconic Canadian brand, to remain based in its home country could help mollify objections to the deal from Canadian authorities.
The new company will be headed by Behring, who is also the managing partner of 3G Capital. The deal was partially financed by legendary investor Warren Buffett, whom the Times notes is a longtime admirer of 3G.
Buffett's Berkshire Hathaway will pay the U.S. corporate tax rate on any income earned on its $3 billion investment in the combined company, according to The Wall Street Journal.