Burger King to buy Canadian chain Tim Hortons

BY Ariel Min  August 26, 2014 at 11:05 AM EST
File photo of a Tim Hortons cafe in New York City taken on Aug. 25. The American fast food giant Burger King announced it has agreed to merge with Canadian coffee and cafe chain Tim Hortons. Photo by Spencer Platt/Getty Images

File photo of a Tim Hortons cafe in New York City taken on Aug. 25. The American fast food giant Burger King announced it has agreed to merge with Canadian coffee and cafe chain Tim Hortons. Photo by Spencer Platt/Getty Images

Burger King announced on Tuesday that it will buy Canadian restaurant chain Tim Hortons for about $11.4 billion, which would create the world’s third-largest fast-food chain. The deal also would move Burger King’s headquarters to Canada.

The combined business will have about $23 billion in sales and more than 18,000 restaurants in 100 countries, according to a Burger King press release.

Moving the merged company’s headquarters to Canada would mean it would have lower corporate taxes. When word of the merger talks came to light in August, it renewed the debate over American businesses shifting abroad to lower their tax bills. President Barack Obama had criticized the practice in July.

While Burger King and Tim Hortons will operate independently, Bloomberg noted that the merger gives Burger King access to “a coffee brand with a cult following,” which might boost breakfast sales. It also allows the burger chain to dip its toe into the grocery business by selling Tim Hortons packaged coffee in supermarkets.

The Associated Press reported that breakfast and coffee sales have been growing at about 5 percent a year between 2007 and 2012, becoming the fastest-growing segment in the restaurant industry. Compared to its competitor McDonald’s, which had about 31 percent of the breakfast market in 2012, Burger King had been behind with 3-4 percent.

The deal will not rebrand Tim Hortons nor bring significant changes to its business model and company structure, Burger King said.