Burger King And Tim Hortons Merger

1.0. Introduction

The merger between Burger King and Tim Hortons brought positively benefits to both sides. This report will discuss about the synergies that Burger King and Tim Hortons expects from the merger based on each other opinion. Next, the relationship of tax inversion to U.S. Company and why tax inversion may not motivate the merger. The comparison of the two companies will be provided in terms of revenue, earnings growth and price-earnings ratio in the past 2 years, followed with the bargaining power of the two companies in the merger negotiation.

2.0. Synergy effect on Burger KIng

The expectation of Burger Kings from the merger is an improvement to the companies in terms of incremental revenue, better menu resources and tax savings.

citizenship and become a Canadian company will mean that they still have a support from U.S. military families by buying its food. But, as paying its fair share of taxes, Burger King will no longer support service members. (Hortons, Tim. 2015). A tax inversion may not be affected by the merger from Burger King and Tim Hortons. According to Alexandre Behring, Burger King’s executive chairman, the motivation of the merger is to create a new global leader in the quick service restaurant sector and improve the growth of the two companies. (Hortons, Tim., 2015)( Sahadi, J. 2015). Although, the headquaters located in Canada would pay corporate tax rates lower than in the U.S., in fact, it doesn’t make much difference for Burger King and Tim Hortons. Because currently, Burger King’s effective tax rate is in the mid to high 20s which is higher than a Canadian tax rates. (Mider, Zachary R. 2015). However, a liberal group opposed to the merger reckoned it up and found big savings. From the merger, the company could be spared at least $400 million from its U.S. tax bill over the next four years, according to the liberal group Americans for Tax Fairness. The deal could also save Burger King shareholders as much as $820 million in capital gains taxes, according to the group. Also, it fits perfectly with Burger King’s business model, where the burger giant focuses more on international expansion and menu innovation. (Amigobulls.com,

As in the third quarter of 2014, Tim Hortons revenue reached to 835.74M, while Burger King was only have 278.90M. (Ycharts.com, 2015)( Wong, Venessa. 2014). The difference revenue in the third quarter 2013 of Tim Hortons was almost tripled from Burger King’s revenue. Burger King has shown a continually decreased of revenue since the last four years, it was because Burger King only relies on franchise royalties and fees and real estate for almost 80.6 percent of its revenue. In contrast, Tim Hortons’ revenue comes from distribution sales, which almost 57.5% came from distribution sales. (Team, T., 2014). These are sales of products, supplies, and restaurant equipment shipped directly from the company’s stores or by third-party distributors to restaurants. The elements of manufactured, warehouse, and distribution capabilities benefit Tim Horton’s restaurants because it is improving Tim Hortons’ product quality and consistency, protect proprietary interests, facilitate the expansion of their product offerings, control availability and timely delivery of products, provide economies of scale and labour efficiencies, and lastly generate additional sources of income and financial returns. (Team, T. 2014). In 2013, Tim Hortons’ revenue was nearly $3.2 billion of, compared with Burger King’s $1.1 billion. (Ycharts.com,