Monday, August 25, 2014

Will the Burger King Whopper swallow Tim Hortons?

Here in the Great White North, you don't have to be a coffee lover to appreciate just how deeply ingrained Tim Hortons is within the Canadian national psyche. With a store on almost every other street corner, and terms like "double double" and "roll up the rim" now firmly embedded in the national lexicon, Tims has become integral to how we view ourselves.

So when news broke over the weekend that Burger King was in talks with Tim Hortons on a possible "merger of equals", it didn't take long for the news to dominate headlines here in Canada.

My take is fairly simple: Tims is more than a place to pick up a snack for the kids. It's part of who we are, and there is risk to its heritage by opening the door to a possible American takeover.

Moreover, we've been down this road before - Wendy's bought Tims out in 1995 amid great hopes of mutual cross-border expansion. That didn't work out as planned, largely because Tims just doesn't resonate in the U.S. as it does in Canada, and Wendy's sold its shares in 2006 before Tims was spun off as a standalone company in an IPO.

The Burger King deal, ostensibly being pushed because it would allow BK to move its head office to Canada and avoid higher U.S. corporate taxes, smacks of failing to learn from the mistakes of the past. President Barack Obama, fed up with U.S. companies pulling off "inversion" deals like this to avoid paying U.S. taxes, has pledged to crack down on the practice.

I wrote this article for Yahoo Canada Finance that outlines the key winners and losers of a possible deal, and the factors that are driving it in the first place:
Tim Hortons, Burger King deal: Winners and losers
Your turn: Do megamergers benefit anyone beyond shareholders?


Unknown said...

Carmi: I have looked at the history of mergers myself. A nasty one was Mercedes Benz buying up Chrysler. That term, "a merger of equals" shocked me when I saw it in this post, for good reason. In the Chrysler deal, the CEO for Benz at the time, admitted afterwards that it was a lie. Today, Chrysler has rid itself of Benz after a torturous route that isn't over yet. I hope the BK deal fails to go through, and agree with you!

21 Wits said...

While I do enjoy a plain burger from Burger King, even better than McDonald's plain burger, I believe Burger King has always played second fiddle to McDonald's. I don't know anything about Tim Hortons, but if it's doing well, why would they consider a merger with a company that apparently can't make it here, in the one of the biggest fast food junkie places I know of? I say boo-hoo Burger King sorry, but no tomato or anything else!

Theresa said...

I find it fascinating that non-Americans residing in the US have their 'worldwide' income taxed but corporations are sheltered if they move their headquarters outside of the US.

I can't see any uptake from this merger. If marriage with Wendy's didn't work, I question if BK has the cache to benefit Tims. I think not. Sure, if BK wants a partnership to serve Tim's coffee and donuts on their menu, that might work but not a merger.

ifthethunderdontgetya™³²®© said...

The Burger King deal, ostensibly being pushed because it would allow BK to move its head office to Canada and avoid higher U.S. corporate taxes

This is exactly what it's all about.

And that's why both Burger King (BKW) and Tim Horton (THI) moved much higher today.

To me, this kind of thing is egregious. You want to take advantage of everything the U.S. has, including its consumer base. But you don't want to pay taxes, so you take advantage of loopholes created by the rich and shameless.