Tim Horton + Burger King? Will it work?

[Chuckanut]

The reported [-]takeover of Burger King by[/-] Tim Horton and Burger King merger.

Will it work? Does this mean we will be able to get Tim Horton Donuts for breakfast at our USA Burger Kings?

 

[gauss]

Argh, I find the smell of Burger King products rather unpleasant. I hope this doesn't adversely impact my Tim Horton experience.

-gauss

 

[Meadbh]

Here is the reaction of most Canadians: NOOOOOOOOOO!!!!!!

 

[Chuckanut]

Here is the reaction of most Canadians: NOOOOOOOOOO!!!!!!

My understanding is that the new fast good giant will be headquartered in Canada. Maybe that will help.

 

[mpeirce]

I'm sure there various reasons for this merger, but one of the big ones it to flee the high US corporate tax rates. The US corporate tax rate is about 35 percent, while Canada’s is about 15 percent.

Also remember that Wendy's owned Tim Horton's for a while. There are still a couple of combined Wendy's / Tim Horton's around here (Wendy's is headquartered near Columbus).

 

[MichaelB]

Soon to be heard

Uh, I'll have a double Whopper with mayo and a side of Poutine

 

[kcowan]

For this Canuck, I will sell out today at $84? and look to buy the king.

 

[Andre1969]

Well, Burger King is mostly-owned by 3G Capital, a Brazillian company. So regardless of what happens, looks like most of the profit is going south of the border, anyway...

 

[M Paquette]

Do you want Timbits with your Croissan'wich?

Aaaaaand... Burger Thing turns Canadian, with maybe a side of Irish Holding Company and a pinch of Dutch. Taxes? Not any more...

What's not to like, eh?

 

[Meadbh]

I'm sure there various reasons for this merger, but one of the big ones it to flee the high US corporate tax rates. The US corporate tax rate is about 35 percent, while Canada’s is about 15 percent.

You are correct that the motivation is taxes. There may be more than a 20% drop in corporate tax rates, because Canadian companies have more ability to funnel profits through foreign companies, as this article from the Globe and Mail points out:

Try It Now Streetwise - The Globe and Mail

 

[kcowan]

Here is a version not blocked by the G&M paywall.

 

[Meadbh]

For this Canuck, I will sell out today at $84? and look to buy the king.

Did you? If you keep your TH shares you will get the equivalent of $94 for them between cash and shares in the new company.

 

[kcowan]

Yup I always believe in leaving room for the next guy/gal rather than holding out for the top! I also remember the buyout of Bell by the OTPP! Plus I do not believe the $94 price because it is based on a PE of 27! For coffee and a dog of a burger chain...

I will wait for it to settle before considering a repurchase. Probably more than a year.

I heard that Buffett is getting 9% on his preferreds. Now that is a sweet deal!

 

[Chuckanut]

Here's an interesting quote from a letter in yesterday's Wall Street Journal concerning the tax advantage of this merger.

When the owner of preferred stock is another company, the owner gets to deduct a whopping 70% of that dividend before calculating the tax on it. On an investment of $3 billion, annual interest would amount to $270 million. Berkshire Hathaway will only pay tax on $81 million, suggesting that its actual tax liability each year will amount to about $32 million if his company pays at the maximum corporate federal income-tax rate.

That's a tax rate of a bit less than 12%. Not bad for that income.

 

[Lakewood90712]

IIRC , If you go back a decade or more, Burger King was owned by a UK firm, Grand Metropolitan ? and Duncan was part of the TOGO's - Baskin-Robins - Duncan restaurant franchise firm.

 

[brett]

We live in Canada.
We dislike Tim Horton's and never set foot in a Burger King.
I would sell.

 

[6miths]

I don't mind the odd TimBit but I'm not a coffee person and the tea I brew is better than Tim's. Used to go to Burger King but stopped when they went to Pepsi products. Started going back now and then when we had kids because they had a great play place. Once they pulled that out of our local BK, it was all over.

 

[Meadbh]

I occasionally stop in at Timmy's for coffee and a sandwich. I happen to like their coffee, but Starbucks is too bitter for my taste. When I have a hankering for a fast food burger I go to Wendy's. IMHO their burgers are far superior to Burger King's, their salads are good and their customer focus is very pleasant, at least at my local Wendy's.

Canada is already saturated with Tim's and I think two of the goals of this merger are to use BK's marketing savvy to drive a successful large scale US expansion, and to get a stronger foothold in overseas markets for both companies. There are Tim's kiosks in Spar stores in Europe, but they pale in comparison to the home product. Locating the company in Canada will avoid US corporate taxes, so the profitability of overseas expansion would be much more attractive.

 

[kcowan]

I think the VCs are going to strip Tim of his profits and leverage the deal financially then sell it again. With a high debt load, the combined company will not be able to do many dividends. It has little to do with coffee and burgers.

 

[munnyman]

I had a $50k bond mature about 5 years back and put about $35k of it into THI for 1000 shares...for an odd reason to most, perhaps...as I got frustrated waiting in the drive through lines every morning. Figured if the lineups were this consistent there might be a good investment...so i've held it. Glad I did. It's in my RRIF and I'm happy. Read a report a while back that Tim's has 77% of the fast food coffee biz in Canada. Actually, I prefer McD's coffee, apparently better than what they sell in US?

 

[Janet H]

Do you want Timbits with your Croissan'wich?

Aaaaaand... Burger Thing turns Canadian, with maybe a side of Irish Holding Company and a pinch of Dutch. Taxes? Not any more...

What's not to like, eh?

... would you like some bits with that?

 

[Turboslacker]

I had a $50k bond mature about 5 years back and put about $35k of it into THI for 1000 shares...for an odd reason to most, perhaps...as I got frustrated waiting in the drive through lines every morning. Figured if the lineups were this consistent there might be a good investment...so i've held it. Glad I did. It's in my RRIF and I'm happy. Read a report a while back that Tim's has 77% of the fast food coffee biz in Canada. Actually, I prefer McD's coffee, apparently better than what they sell in US?

I think McD coffee ain't too bad really. Starbucks has many types of drip/brewed coffee but I only like their Pike Place one. The Americano is rancid due to their bitter acidic espresso beans.


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[Ronnieboy]

With our recent trip to Canada, eh? I was able to visit a Tim Horton's (more than once) and it was ok, nothing spectacular but decent doughnuts. The funny thing is we stopped at one late at night and their parking lot and the one next to it was full of cop cars. I guess the sterotype is true in Canada as well

 

[Walt34]

The funny thing is we stopped at one late at night and their parking lot and the one next to it was full of cop cars. I guess the sterotype is true in Canada as well

Was there any other choice late at night? Often the reason is that no other place to eat is open other than the doughnut shop.

 

[Meadbh]

I once took a course where we had to accompany the police on their nocturnal rounds. I learned that Tim Horton's routinely provides free coffee (though not donuts) to cops on the beat. They like to see the cops coming in as it keeps the criminals away.