Burger King Canadian Chain Buy Looks Like Tax Dodge

Burger King is joining a growing list of unpatriotic U.S. corporations by moving its headquarters to Canada.  Burger King is trying to buy Tim Hortons, the legendary Canadian donut chain, in order to dodge paying its fair share of corporate taxes here in the United States.

This is part of a recent pattern of "tax inversion" among US corporations. Tax inversion is done solely to avoid taxes. Companies like Burger King buy a foreign company with the deal structured in such a way that the foreign corporation seems to be buying the American company. The new combined entity is headquartered in the foreign country and incorporated as a foreign company, enabling the former American Company to dodge millions of dollars in US taxes.

Burger King is not the first US company to pull this sleazy tax dodge. Walgreens tried the same thing several months ago. The immediate threats of a consumer boycott caused them drop the idea very quickly.

When Daniel Schwartz took over as chief executive of Burger King last year, he set about pinching pennies.

Mr. Schwartz, 33, had little affinity for traditional corporate luxuries. So he sold the company jet, ended an annual $1 million party held at an Italian villa and moved executives at the company’s Miami headquarters from posh offices employees called Mahogany Row to an open floor plan full of cubicles.

Mr. Schwartz further reduced expenses by selling more restaurants to franchise owners, reducing the amount of money and employees needed to run the business.

This continued a strategy Mr. Schwartz began in 2010, when he led the buyout of Burger King by 3G Capital, a Brazilian investment firm. And it seemed to work. Since Burger King went public in 2012, the company’s value has more than doubled.

But after years of cutting costs at Burger King, Mr. Schwartz and 3G are now prepared to spend big money on the brand. Burger King is in advanced talks to buy Tim Hortons, a Canadian chain of coffee-and-doughnut shops, for more than $8 billion, in what would be the largest-ever acquisition of a restaurant chain. According to a person briefed on the matter, the billionaire Warren E. Buffett’s Berkshire Hathaway will provide a little less than 25 percent of the deal financing by taking preferred shares.

If completed, the deal would provide several clear benefits for Burger King and 3G Capital, which would remain the majority owner. But the deal would also steer the company into perilous territory for fast-food restaurants by bringing together multiple brands under one roof.

Previous attempts at consolidation in the restaurant industry have sputtered. Wendy’s and Arby’s combined in 2008 but split just three years later. Wendy’s also once owned Tim Hortons, but sold it in 2006.