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US fast-food chain Burger King has confirmed it's considering buying Canadian doughnut cafe company Tim Hortons, motivated by a tax avoidance strategy called an "inversion." But the US government may spoil the party.
Burger King said it was in talks to acquire Tim Hortons with a view to forming a new publicly listed company based in Canada.
This would allow the fast-food chain to move its tax base north of the border, where corporate taxes are lower, the Wall Street Journal reported.
The merger would create the world's third-largest fast-food provider, should the intended 'inversion' structure be given the green light by regulators.
Obama and Lew are against tax inversions
A 'tax inversion' or 'corporate inversion' is a US tax avoidance strategy involving relocation of a company's registered headquarters in a lower-tax country. It's often achieved by buying a smaller foreign company and making it the new formal owner of the new multinational corporation, even as the real operational headquarters stay in the United States.
Tax inversions are especially attractive to globally active US-based multinationals, because it allows them to avoid paying US taxes on the profits they earn in foreign operations.
Analysts believe that the US government will likely push back against any move by the iconic American brand to move its tax base abroad. Treasury Secretary Jack Lew and Presiden Obama have both recently expressed their disapproval of tax inversions.
Brands to remain
Burger King said the new company would have 18,000 restaurants in 100 countries with about $22 billion (16.7 billion euros) in annual sales.
The Miami-based US firm and Ontario-based Tim Hortons would continue to operate as separate brands, but would share corporate services.
Burger King Worldwide has been slashing costs since Brazilian investment firm 3G Capital acquired it in 2010. The Brazilians took the chain public again in 2012 in parallel with a revamped menu and splashy marketing.
hg/nz (AP, dpa)