The second largest fast-food burger chain in the U.S. is in talks to merge with the largest fast food service in Canada and could create an $18 billion company.
If a merger with fast food restaurant Burger King and coffee and donut chain Tim Hortons goes through, the two would create the third largest fast-food business in the world with 18,000 locations in 100 different countries. (Video via Burger King, Tim Hortons)
The two sides confirmed negotiations in a statement reading “Tim Hortons and Burger King each have strong franchisee networks and iconic brands … Any transaction will be structured to preserve these relationships and deepen the connections each brand has.”
The statement goes on to say, if the deal goes through, Burger King will move its headquarters north into Canada to join Tim Hortons. The migration though is part of a bigger issue that’s become a recent trend among American companies.
CNBC PRES. OBAMA: "If you're basically still an American company but you're simply changing your mailing address in order to avoid paying taxes, then you're really not doing right by the country."
Tax Inversion is when an American company such as Burger King buys a foreign company and then moves the headquarters to that foreign location in order to receive a tax break. But, The Wall Street Journal reports, Republicans and Democrats are split on how to fix the issue.
"Many Republicans think the solution is to lower the U.S. statutory tax rate. The White House and Democrats are pushing for laws that close, what they view as, gaping tax loopholes."
The President and the U.S. Treasury Department have urged American companies to stay in the U.S. and have even mulled executive action to stop companies from moving.
The US has one of the most expensive corporate tax rates in the world at about 35 percent, while the tax rate in Canada sits closer to 15 percent.
But as Fortunepoints out, while this might be great for Burger King financially, it could damage the brand.
"Most proposed tax inversions so far have been for healthcare-related companies that don't have much consumer brand awareness. Burger King, however, is much different. Got to wonder if this could be the spark that lights some congressional action."
Burger King and Tim Hortons said in a joint statement the two companies would operate as standalone brands despite the merger.
This video contains images from Getty Images and tigerzeye / CC BY 2.0
