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Thread: Hard to Swallow? Burger King May Move to Canada

  1. #1
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    Hard to Swallow? Burger King May Move to Canada

    Hard to Swallow? Burger King May Move to Canada

    NEW YORK — Aug 25, 2014, 4:54 PM ET
    By CANDICE CHOI and MICHELLE CHAPMAN Associated Press
    Associated Press
    Some Burger King customers are finding it hard to swallow that the home of the Whopper could move to Canada.

    Investors seemed to welcome the announcement by Burger King late Sunday that it was in talks to buy Canadian coffee-and-doughnut chain Tim Hortons and create the world's third-largest fast-food restaurant company. The news pushed shares of both companies up more than 20 percent.

    But customers were already voicing their discontent with the 60-year-old hamburger chain because of its plans to relocate its corporate headquarters to Canada in a deal that could lower its taxes. By Monday afternoon, Burger King's Facebook page had more than 1,000 mostly negative comments about the potential deal.

    Shawn Simpson, who hadn't heard of the talks until approached by a reporter while he was at a Burger King in New York City on Monday afternoon, said he didn't like the idea of the company paying its taxes to another country.

    "For them to take their headquarters and move it across the border is a negative for me," said Simpson, 44, who was ordering a Double Whopper and onion rings. "It's an American brand."

    A representative for Burger King, Miguel Piedra, said while the headquarters of the new company would be in Canada, Burger King would still continue to be run out of Miami. Piedra also said the comments on Burger King's Facebook page represent a small fraction of the company's more than 7 million followers on the social media site.

    Burger King isn't the first company to face fallout over a tax inversion, which is when a company acquires a business in another country, then relocates its headquarters there. Big U.S. companies, including pharmaceutical AbbiVie and Valeant Pharmaceuticals, recently have pursued tax inversions to cut their costs. Earlier this month, Walgreen abandoned plans to pursue a tax inversion after negative publicity about the planned move.

    President Barack Obama and Congress have criticized inversions because they mean a loss of tax revenue for the U.S. government.

    White House spokesman Josh Earnest wouldn't comment on Burger King's announcement on Monday, but said the president generally believes it's unfair for companies to pursue a tax inversion merely to pay less in taxes. The Obama administration is considering executive steps it could take to de-incentivize inversions.

    Unlike many other companies, Burger King's move also has the potential to turn off customers as well, since it's a brand people are so familiar with. It's difficult to gauge whether such fallout would hurt the fast-food chain's business in the U.S.

    Some analysts say even if some Burger King customers are initially angered by the move, the feelings could quickly fade since there wouldn't be any significant changes in restaurants as a result of the deal. Besides, many Burger King customers who go to the chain for convenience may not care enough about the move to change their eating habits, said Jonathan Maze, editor of Restaurant Finance Monitor, which tracks the industry.

    "It's going to irritate people, but basically it's a paper move," he said.

    It's not clear exactly how much a combination with Tim Hortons would reduce Burger King's tax costs. A recent report by KPMG found that total tax costs in Canada are 46.4 percent lower than in the United States.

    Both companies cautioned there was no guarantee a deal would happen. But each could benefit from the deal, which they say would create a new holding company with 18,000 restaurants in 100 countries and about $22 billion in sales.

    Burger King's stock surged $5.78, or 21 percent, to $32.89 on Monday, while Tim Hortons' stock also rose 21 percent to $76. 33.

    A combination with Tim Hortons would give Burger King a stronger position in the fast-growing breakfast and coffee market. Burger King, which has undergone numerous ownership changes since it was founded in 1954, has been slashing costs and increasingly looking for growth overseas under majority owner, 3G Capital, which bought the chain in 2010.

    3G Capital, which has offices in Brazil and New York, would own the majority of shares of the new holding company. In the U.S., it has been revamping the menu and marketing. The efforts haven't yielded significant results, however. In its most recent quarter, sales edged up just 0.4 percent at established restaurants in the U.S. and Canada.

    For Tim Hortons, an acquisition by Burger King, which has a far larger global footprint, could help the doughnut and coffee chain accelerate its international expansion. Tim Hortons has over 3,630 locations in Canada, 866 in the U.S. and 50 in the Persian Gulf area.

    It wouldn't be the first time Tim Horton has paired with a U.S. fast-food chain. Tim Hortons was purchased by Wendy's International Inc. in 1995. In 2006 it completed an initial public offering and was spun off as a separate company.


    http://abcnews.go.com/Business/wireS...rtons-25110516

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    Re: Hard to Swallow? Burger King May Move to Canada


  3. #3

    Re: Hard to Swallow? Burger King May Move to Canada

    This "unfairness" noise pisses me off. The US government is doing everything it can to drive corporations abroad, then they piss and moan when it happens. Politicians and bureaucrats don't understand competition, and what it takes to succeed on an ongoing basis.

  4. #4

    Re: Hard to Swallow? Burger King May Move to Canada

    Yep, this is what you get with redistributionalist tax schemes.

  5. #5

    Re: Hard to Swallow? Burger King May Move to Canada

    I agree with the President that I don't think it's right for US companies to do this and I think some of the corporate whining about the tax code is excessive. At some point though, I think we have to come to the realization that the current corporate tax system isn't competitive and frankly isn't even in line with international norms.

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    Re: Hard to Swallow? Burger King May Move to Canada

    Quote Originally Posted by Democratic Nole
    I agree with the President that I don't think it's right for US companies to do this and I think some of the corporate whining about the tax code is excessive. At some point though, I think we have to come to the realization that the current corporate tax system isn't competitive and frankly isn't even in line with international norms.

    Yeah, that sound's like freedom. Ayn Rand sounding more and more like a profit everyday.

  7. #7

    Re: Hard to Swallow? Burger King May Move to Canada

    Quote Originally Posted by Guckster
    Quote Originally Posted by Democratic Nole
    I agree with the President that I don't think it's right for US companies to do this and I think some of the corporate whining about the tax code is excessive. At some point though, I think we have to come to the realization that the current corporate tax system isn't competitive and frankly isn't even in line with international norms.

    Yeah, that sound's like freedom. Ayn Rand sounding more and more like a profit everyday.

    Pun?

    It's all about it (profit). The boards have a responsibility to create as much value as they can in the stock. If the US govt. won't compete then you better believe that private industry will do what they must to. I would have a problem if a company that I owned a portion of didn't do everything that they could to increase value.

  8. #8

    Re: Hard to Swallow? Burger King May Move to Canada

    I thought we were supposed to admire people who trek northward over the border seeking a better life for their families. #BurgerKing

    Burger King must stay and pay taxes, demands group that neither pays taxes nor makes hamburgers
    http://petitions.moveon.org/sign/bur...r_by=3209668 …

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    Re: Hard to Swallow? Burger King May Move to Canada

    Obama's taxation poster child, Warren Buffett, helping Burger King move to Canada

    Warren Buffett apparently now on Obama's "unpatriotic" list

    Today, U.S.-based Burger King and Canada-based Tim Horton's announced that they have reached a deal to merge. Once the deal is finalized, the company will boast over 18,000 restaurants worldwide. It will generate an estimated $23 billion in annual sales throughout a hundred different countries. ...And one more thing. It will be headquartered in Canada.

    That's because the whole merger is what's known as a "tax inversion" deal. Burger King will basically absorb Tim Horton's and, in the process, move its center of operations from Florida to Canada. Doing so will free them from the United States' onerous corporate taxes.

    Here's a nice chart from KPMG that will give you an idea of what they can look forward to, once their HQ is north of the border:



    With that kind of a split, it's no wonder that companies like B.K. want to ditch the United States.

    Back in July, President Obama had some harsh words for corporations that were doing this kind of thing. He called it "an unpatriotic tax loophole" and scolded companies who think U.S. taxes are too high.

    Even as corporate profits are as high as ever, a small but growing group of big corporations are fleeing the country to get out of paying taxes. They’re keeping most of their business inside the United States, but they’re basically renouncing their citizenship and declaring that they’re based somewhere else, just to avoid paying their fair share.

    I want to be clear: this is only a few big corporations so far. The vast majority of American businesses pay their taxes right here in the United States. But when some companies cherrypick their taxes, it damages the country’s finances. It adds to the deficit. It makes it harder to invest in the things that will keep America strong, and it sticks you with the tab for what they stash offshore. Right now, a loophole in our tax laws makes this totally legal – and I think that’s totally wrong. You don’t get to pick which rules you play by, or which tax rate you pay, and neither should these companies.

    We could point out that the President is the king of deciding which laws "rules" he plays by, but let's just get to the good part.

    Whenever Obama needs to justify higher taxes, there's always one name he brings up: Warren Buffett. If the President is to be believed, Buffett is a financial genius whose opinions on US taxes are second to none. That's usually because he's advocating increases. Unfortunately, the President who thinks inversions are "unpatriotic" now has a problem on his hands.

    His taxation poster child, Warren Buffett, is financing the move.

    As the WSJ reports, Buffett's company is dumping $3 Billion into the deal:

    Adding a twist to the deal, legendary investor Warren Buffett’s Berkshire Hathaway Inc. is providing $3 billion in preferred equity financing, throwing him into the center of the debate over U.S. tax policy.

    Yes, Obama's tax guru is helping to grease the wheels of this inversion. Why? Yahoo finance has a good breakdown:

    So what's in this for Warren? Billions. This isn't about taxes, but endorsements and relationships. Burger King's majority owner is 3G, a Brazilian PE firm led by 74 year old billionaire Jorge Paulo Lemann. Last year 3G and Berkshire partnered to buy Heinz. Berkshire laid out $8 billion for preferred shares that will pay back $1 billion a year and another $4.25 billion for Heinz common stock. There aren't any terms being leaked on this BK deal yet but Buffett has never been shy about demanding a premium. Expect Berkshire to get at least 10% on the $2.5 billion investment.

    Still this is small potatoes for Berkshire which is sitting on more than $55 billion in cash at last count. The real reason Buffett has to be involved is to protect Berkshire's 9.1% ownership interest in Coke (KO). Burger King is married to Heinz but its drink business is up for grabs. 3G has already pushed for a switch to Pepsi (PEP) in Latin American markets. With earnings flat since 2011 Coke can little afford to lose soda market share, let alone miss growth opportunities for Coke's non-carbonated products. Right now BK sells Nestle's bottled water. While a switch to Coke's Dasani probably won't be explicitly part of this financing package let's just say Berkshire's involvement doesn't hurt.

    In the end, Buffett and Berkshire Hathaway stand to make billions from the inversion while shoring up their various holdings and relationships. Sounds like a smart plan, but does this mean that Obama suddenly thinks his tax genius is just another "unpatriotic" fat cat?

    http://www.caintv.com/obamas-taxation-poster-child-w

  10. #10

    Re: Hard to Swallow? Burger King May Move to Canada

    Some of these 'unpatriotic' moves are being forced upon corporations by the banks themselves.
    In my company, the banks who provide the working capital, are forcing us to purchase goods from outside the US as opposed to similar goods made here because they are cheaper. It's about their ROI.
    So now we are going to get laws that close this loophole and we will be 1-step closer to the govt dictating the profitability of corporations (much like the mandate on insurance providers under Obamacare)...and won't this be great!!! The destruction of the profit motive that was at the core of the success of this country. Hey we can't have threats to the financing of the ponzi scheme...errr entitlement structure.
    For the left the cause is always more important than the people who suffer for it.

    The bigger fool than the fellow who knows it all is the one who'll argue with him.

  11. #11

    Re: Hard to Swallow? Burger King May Move to Canada

    Poutine chicken fries = awesome

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    Re: Hard to Swallow? Burger King May Move to Canada


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    Re: Hard to Swallow? Burger King May Move to Canada


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    Re: Hard to Swallow? Burger King May Move to Canada


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    Re: Hard to Swallow? Burger King May Move to Canada


  16. #16

    Re: Hard to Swallow? Burger King May Move to Canada

    Would anyone really miss BK if they folded or left the country?

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    Re: Hard to Swallow? Burger King May Move to Canada

    It that really the point?

  18. #18

    Re: Hard to Swallow? Burger King May Move to Canada

    "You don’t get to pick which rules you play by, or which tax rate you pay, and neither should these companies." From the story.

    Amazing the guy who picks and chooses what laws to enforce will make a statement this that.

    Not to mention, at least in this case, the company operates is almost every developed county in the world, why wouldn't they pick a country to operate from that welcomes then, doesn't vilify them and bolsters their bottom line with lower costs of operations?

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    Re: Hard to Swallow? Burger King May Move to Canada


  20. #20

    Re: Hard to Swallow? Burger King May Move to Canada

    Quote Originally Posted by The Tradition
    Yep, this is what you get with redistributionalist tax schemes.


    Unlike CANADA?!?!?!?!

    "The transition from democracy to tyranny is most easily brought about by a popular leader who knows how to exploit the class antagonism between the rich and the poor within the democratic state, and who succeeds in building up a bodyguard of a private army of his own. The people who have hailed him first as the champion of freedom are soon enslaved."

    -From Things Plato Never Said

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