Recently, Burger King, the American fast food chain, purchased Tim Horton’s, the coffee and donuts chain in Canada, for US$ 11.4 billion. In the business sense, I personally believe that this was a great deal for the shareholders and the companies themselves.
This was an overseas shift, called the tax inversion, which is quite popular among the US companies. In a tax inversion the companies reorganizes in countries where there are lower tax rates by purchasing or merging with the companies in that country. Canada has a much lower tax rate as compared to the US.
The new company would now have 18000 restaurants in about 100 countries which would boost up the sales to about US$ 22 billion. After the deal was announced both companies’ shares went to an all-time high. This deal also benefits the shareholders as it bought up the share value to $ 94 which is 39% higher than the average share prices of Tim Horton’s.
Even the CEO of Tim Horton’s said that this was a great deal and that there were no plans of the two chains to sell each other’s products. The combined company now would become the third largest fast food company in the world.
References-
- “Burger King in talks to buy Tim Hortons.” Tax Inversion. N.p., n.d. Web. 25 Aug. 2014. <http://www.theguardian.com/business/2014/aug/25/burger-king-tim-hortons-in-tax-inversion-deal>.
- Evans, Pete. “Tim Hortons, Burger King agree to merger deal.” CBCnews. CBC/Radio Canada, 26 Aug. 2014. Web. 26 Sept. 2014. <http://www.cbc.ca/news/business/tim-hortons-burger-king-agree-to-merger-deal-1.2746948>.