Burger King is buying Tim Hortons and moving headquarters to Canada, which would let the fast food chain cut its tax bill, but those plans could face a political backlash. Fred Katayama reports.
The home of the Whopper could become the latest tax chopper. Burger King is in talks to buy Canada's Tim Hortons. A deal would create the world's third largest fast food chain with $22 billion in sales. It would also create a way for Burger King to shrink its tax bill. The two companies plan to create a new corporation headquartered in Canada to take advantage of the lower tax rate there. But with a brand name so familiar to consumers, it may not be easy for Burger King to have it its way. The White House has blasted these so-called tax inversion deals after a wave of American drug makers bought foreign companies and moved their headquarters offshore. Caving to public pressure, Walgreen recently decided not to pursue an inversion when it took over a European drug store chain. That's the third time a possible tax inversion deal has fallen apart. And that's not all. Miller Tabak senior analyst Stephen Anderson said, "We see the proposed merger facing potential political backlash on both sides of the border, i.e., a U.S. company fleeing because of taxes, and iconic Canadian company being taken over once again." But he says a merger would benefit both companies, helping Timmy's expand in the U.S. and giving Burger King access to a high margin product, coffee. News of the talks delivered a jolt of java to stocks of both Burger King and Tim Hortons, driving them sharply higher in early trading. Investors beware: a Reuters analysis found many inversion deals fail to produce big returns for investors.