News Column

Burger King cooks up whopper of a tax deal

August 26, 2014

By Peter Campbell, Daily Mail, London

Aug. 26--Burger King will become the latest US group to flip its tax base after agreeing to buy a Canadian doughnut chain.

An pounds sterling 11bn deal will see the burger-seller buy Tim Hortons to create the world's third largest fast food group with around 18,000 outlets worldwide.

It is the latest in a line of deals where American firms have shifted their tax bases out of the US.

The US corporate tax rate is 35pc, but 26.5pc in Ontario, where Tim Hortons is based.

In a joint statement, the pair confirmed they are in talks.

'Within this new entity, Tim Hortons and Burger King would operate as standalone brands, while benefiting from shared corporate services, best practices and global scale and reach,' they added.

Burger King's private equity backer, 3G, will remain in overall control. 3G, which is based in New York but has its roots in Brazil, snapped up Burger King for around pounds sterling 2bn in 2010, when the group was struggling.

It floated 30pc on the stock exchange the following year, and still controls more than two thirds of the shares. Tim Hortons used to be owned by US fast-food chain Wendy's, before being spun off as a separate company in 2006. It is Canada's biggest coffee seller with around 4,500 outlets, and has been enjoying strong growth.

Burger King has been hit by the fast food slowdown as falling consumer confidence eats away at household takeaway budgets.

3G was co-founded by billionaire Jorge Paulo Lemann, Brazil's richest man.

Will Slabaugh, an analyst at Stephens, said the group has a history of squeezing costs out of companies that it buys.

'These guys are known for making some very smart financial moves,' he added.

3G has been criticised in the past for installing such a young management team at the group.

Burger King's chief executive Daniel Schwartz is 32, while its chief finance officer Joshua Kobza is even younger at just 28.

The oldest member of its senior team is the North American boss Alexandre Macedo, who is 36.

Bloomberg's respected Businessweek magazine previously said the company was 'run by children'.


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Source: Daily Mail (London, England)

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