Burger King Will Clear Latest Hurdle In Tim Hortons Merger, Source Says

Burger King’s next hurdle looks to be cleared soon.

Bidness ETC is reporting that the merger joining Burger King (NYSE: BKW) and Tim Hortons (NYSE: THI) will receive regulatory approval from the Canadian government sometime in the middle of December, between Dec. 15 and 20. Though no official word has come from either of the parties concerned, the word did come from someone close to the situation.

The merger would create a worldwide conglomeration of 18,000 stores in 100 countries with an annual financial stream of about $22 billion. Burger King is expected to relocate their home offices to the Toronto area to take advantage of the lower tax rate in Canada. Current United States corporate tax rates run about 40 percent while in Canada, corporate rates run about 26.5 percent.

Once the merger is completed, both Burger King and Tim Hortons will run as separate entities but benefit from sharing corporate services and each other’s global reach and presence. Once that is set up, then each restaurant can begin sharing products between them.

3G Investments, a Brazilian-owned investment company who currently owns 70 percent of Burger King, will end up owning a majority share (51 percent) of the newly-merged corporation.

The New York Post is reporting that the Canadian regulatory agency that will approve the merger were concerned at first with the reputation of 3G. 3G had a reputation for putting companies in debt then squeezing whatever profit they could out. But, the regulatory agency felt that the merger would further benefit Canadian interests, so the merger will be completed.

The merger has had its share of hurdles to clear. Once the merger was announced, the United States Treasury Department announced that regulations would be tightened so mergers that include international interests would have a harder time leaving the United States for better tax breaks worldwide. Even with the new limitations, Burger King was still able to begin work on the merger.

Burger King was wise to focus their merger intentions on Tim Hortons, a restaurant noted for breakfast fare such as coffee and donuts. The breakfast market is the fastest growing market in the industry and more restaurants are trying to pry a part of the market share for themselves. Taco Bell, for example, has introduced a breakfast menu to compete in the very tight breakfast market. Even Burger King themselves has reintroduced the Yumbo breakfast grinder after an almost 40-year absence to try to drum up interest.

The merger with Tim Hortons should provide a sharp boost to their breadfast numbers once the merger is complete.

[Image courtesy of AP/New York Post]