Burger King Worldwide is in talks to buy Canadian chain Tim Hortons and move its headquarters to Canada, becoming the latest American company seeking to relocate to a lower-tax country.
Burger King would create the world's third-largest fast-food chain by merging with Canada's biggest seller of coffee and doughnuts, the companies said in a statement. Canada's corporate tax rate is 26.5%, compared with 40% in the U.S., according to audit, tax and advisory firm KPMG.
The deal threatens to renew debate over American companies shifting their headquarters internationally in search of a lower corporate tax bill. The trend drew criticism last month from President Barack Obama. His aides vowed that the administration would take action to curtail the practice.
3G Capital, which has a 70% stake in Burger King, would own the majority of the shares of the new company, according to the statement.
The combined business would have about $22 billion in sales and more than 18,000 restaurants in 100 countries, according to the statement. The deal is subject to negotiation, and Burger King and Tim Hortons don't plan to comment further until an agreement is reached or discussions are discontinued.
It's not clear whether the move would affect the chains' agency relationships. The two chains will operate as standalone brands, the companies said. Quick-service restaurants -- McDonald's in particular -- have seen coffee as an area of growth.
Burger King has had an active year with marketing, launching a new tagline, "Be your way," in May. The company also settled on a new agency roster, hiring WPP's David as its lead global agency this spring. In the U.S., Burger King works with Pitch on creative, Code and Theory on digital and Horizon on media. Overseas, work is handled on a more local level. WPP's JWT Canada handles work for Tim Hortons.
Earlier this month, Burger King reported that same-store sales in the U.S. and Canada rose 0.4%. The company has been trying to introduce fewer new items to make its kitchens faster and less complex. Also earlier this month, the chain brought back Chicken Fries for a limited time and announced that it would stop selling its lower-calorie Satisfries in most U.S. and Canadian stores. Burger King spent about $257 million on U.S. measured media in 2013, according to Kantar Media.
$1.81B AT&T ad spending
U.S. measured media spending for Tim Hortons was $11.3 million in 2013, according to Kantar. The chain has 859 restaurants in the U.S., according to Euromonitor, although those locations are primarily in the Northeast and Midwest.
Burger King, like most fast food chains, has been trying to entice customers with value offerings, including a two-sandwiches-for-$5 deal.
The plan to move to Canada follows Burger King's debut on the New York Stock Exchange in 2012. The chain had been taken private in 2010 by 3G, a New York investment firm, which got $1.4 billion in cash from the public offering.
Between mid-June and late-July, when Obama began criticizing deals that cut taxes by relocating outside the U.S., at least five large American companies have announced plans to make such a move -- known as an "inversion." That includes AbbVie and Medtronic.
Since the start of 2012, at least 21 U.S. companies have announced or completed inversion deals, comprising almost half the total of 51 such transactions in the past three decades.
Tim Hortons, Canada's biggest coffee merchant, has about 4,500 restaurants and has been expanding its product lines to boost sales.
-- with Bloomberg News