And apparently, they’re not even moving their headquarters to avoid taxes, as first thought. It’s to appease Canadian regulators:
Updated, 8:45 a.m. | Burger King Worldwide agreed on Tuesday to buy the Canadian restaurant chain Tim Hortons for about $11.4 billion, creating one of the biggest fast-food operations in the world – with a little help from Warren E. Buffett.
As part of the transaction, however, the American burger giant will move its home to Canada, where the combined company’s biggest market will be.
Under the terms of the deal, Burger King will pay 65.50 Canadian dollars in cash and 0.8025 of one of its shares for each Tim Hortons share. That amounts to about 94.05 dollars a share, or $85.78 a share, based on Burger King’s closing price on Monday.
The combined company will have 18,000 restaurants in 100 countries, and $23 billion in annual revenue.
But while Burger King will relocate north of the border, raising concerns about yet another company moving abroad to reduce its tax bill, the switch in corporate nationality appears more aimed at appeasing Canadian regulators wary of a foreign company buying a national icon like Tim Hortons. In fact, Burger King is expected to save only a little, if any, on taxes through the so-called corporate inversion.
The net worth of Burger King is about $7 billion dollars according to Wall Street. So a company worth $7 billion dollars is buying a company, Tim Hortons, worth $11.4 billion dollars. Now that’s a neat little magic trick. As the report states there is really no tax advantage in this deal. The corporate tax in Canada is 27%. The corporate tax in the US is 35%. But the actual tax after deductions that Burger King pays in the US is roughly 27.8%. So this deal must be all about labor costs? In some way.
Burger King is nothing in this country but Timmy’s is part of the national psyche in Canada. And BK’s size is irrelevant as they are owned by a Brazilian billionaire and Uncle Warren Buffett is investing in this as well so they have all the cash they need.
Buffett is putting in $3 billion dollars in cash. (There should be a law. There probably is that nobody’s enforcing.) You don’t suppose that that Brazilian billionaire owns the largest cattle ranch in Brazil do you? And that he ships all of those giant-sized beef patties to the USA to make Whoppers with? My, my, the games that the oligarchy plays at our expense.