MIAMI (CBSMiami/AP) — The “Home of the Whopper” is heading to the Great White North. Well sort of.
Burger King confirmed Tuesday that it struck a deal to buy Tim Hortons Inc. for about $11 billion.READ MORE: Miami-Dade State Attorney, County Take Aim At Elderly Abuse
The Miami-based BK said the corporate headquarters of the new company will be in Canada; the move will help King lower its taxes. Such tax inversions have been criticized by President Barack Obama and Congress because they mean a loss of tax revenue for the U.S. government. Burger King and Tim Hortons said the chains will continue to be run independently and that Burger King will still operate out of Miami.
The tie-up could help each Burger King and Tim Hortons chains pose a greater challenge to market leaders such as McDonald’s and Starbucks. It also reflects a desire by both companies to expand internationally. Burger King, which has about 14,000 locations, has been striking deals to open more locations in developing markets. The company sees plenty of room for growth internationally, given the more than 35,000 locations McDonald’s has around the world. Tim Hortons has more than 4,500 locations, mostly in Canada.
Back in the U.S., breakfast and coffee have been hot growth areas in the fast-food industry. Between 2007 and 2012, breakfast grew faster than other segment in the restaurant industry at about 5 percent a year, according to market researcher Technomic. But it has long remained a weak spot for Burger King.READ MORE: Florida Man Severely Burned When Fire Erupts During Arrest Attempt At Wawa Gas Station
McDonald’s led the category with 31 percent of the market in 2012, while Burger King had just 3 percent to 4 percent, according to Technomic.
Under the deal, Burger King Worldwide Inc. will pay $65.50 Canadian ($59.74) in cash and 0.8025 common shares of the new company for each Tim Hortons share. This represents total value per Tim Hortons share of $94.05 Canadian (US$85.79), based on Burger King’s Monday closing stock price. Alternatively, Tim Hortons shareholders may choose either all-cash or all stock in the new company.
Tim Hortons stock rose more than 10 percent in Tuesday premarket trading. Burger King’s shares fell slightly.
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