Burger King Worldwide Inc (NYSE:BKW) is planning to collaborate with Tim Hortons Inc. (USA) (NYSE:THI) and form an overall market capitalization of $18 billion. Experts are speculating that a lower-tax environment is one of the primary reasons behind this move and Burger King Worldwide Inc (NYSE:BKW) will transfer its headquarters to a lower-taxed Canadian workspace.
If the deal completes successfully, it would be the third-largest fast food service chain with a Canadian base offering comparatively lower corporate taxes. It will be a tax inversion transaction and it will help move Burger King Worldwide Inc (NYSE:BKW) out of the United States. Canada has a corporate tax rate of 26.5 percent as compared to the 40% tax rate in the US.
The two chains will serve as stand-alone brands only and 3G capital will own the majority shares in the new alliance with remaining shares distributed among the shareholders of Burger King Worldwide Inc (NYSE:BKW) and Tim Hortons Inc. (USA) (NYSE:THI). In addition to a gigantic market capitalization, the combined company will own 18,000 restaurants across 100 countries with expected net sales of $22 billion.
Although, tax inversion deals have received a negative response from the US President, Barack Obama who has even referred these companies as “corporate deserters” on July 24, 2014. It might seem a valid concern because over 21 companies have either announced such deals or completed them to lower down taxes.
Earlier, Burger King Worldwide Inc (NYSE:BKW) announced revenue of $261.2 million with a 0.4% increase in same-store sales in Canada and the U.S. The company gained 1% at the close of trading session on August 22, 2014.
This article has been written by Prakash Pandey and edited by Serkan Unal.