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Burger King announced on Sunday that it is in talks to buy Tim Hortons, a coffee chain in Canada. The company then hopes to move its corporate headquarters to Canada in an effort to avoid high American taxes.
If the deal closes, Burger King would reportedly create an entirely new parent company to own the two chains, reports The New York Times. The combined companies would have a market value over $18 billion.
A source for the Times said that the deal could be announced as soon as this week.
Should the move come through, it will be seen as a tax inversion. As the Associated Press explains, this involves an American company hoping to take advantage of a lower tax rate in another country by buying a company there and moving its corporate headquarters.
A recent example of this is pharmacutical company AbbVie, which was based in Chicago, but bought international companies to avoid paying high taxes. Walgreen’s tried to do this, but pulled out of a deal after receiving criticism. Pfizer tried it as well, but ultimately backed out of buying AstraZeneca.
However, the Times’ sources stressed that this is not the main drive behind Burger King’s talks with Tim Hortons. In fact, they insist that the move would only trim off a couple of percentage points off the corporate tax rate. In addition, they will suggest that the deal would create a strong competitor for Yum Brands (which owns KFC and Taco Bell) and McDonald’s.
Burger King is currently based in Miami, where its first restaurant was located back in 1954.
image of Burger King mascot with Brooke Burke-Charvet courtesy of Roger Wong/INFphoto.com