USA Today reports that Burger King has agreed to merge with the Canada-based Tim Hortons restaurant chain. The deal, valued at about $11 billion, will create the world's third-largest fast-food company, with about $23 billion in annual sales and more than 18,000 restaurants in 100 countries.
The new global company will be headquartered in Canada, but each brand will be managed independently, with Burger King retaining its U.S. offices in Miami, the two companies said in a joint statement.
With a new base in Canada, the Burger King merger quickly was lumped into the growing public outcry over tax inversions, which allow U.S. companies to lower their tax bills by reincorporating in a country with lower corporate tax rates through a merger with a foreign firm.
Several members of Congress, including Sen. Dick Durbin, D-Ill., decried Burger King's Canadian business move. In recent months, as more companies have used inversions, President Obama and Congress have publicly criticized the moves because they cut into U.S. tax revenue.
Tim Hortons' stock surged 8.5% to close at $81.05, and Burger King's stock fell 4.3% to $31.00.
Tim Hortons, with about 850 outlets in the U.S., can gain reach globally and here with Burger King's help. And Burger King might get some advice on breakfast strategies to counter new products from Taco Bell and Subway.
By combining the two companies, "We are creating a global (quick-service restaurant) powerhouse," said Alex Behring, executive chairman of Burger King and managing partner of 3G Capital, the majority owner of Burger King.
The new company is expected to trade on the New York Stock Exchange and the Toronto Stock Exchange.
Under the deal, Burger King 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 ($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.
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