Burger King Eyes Acquisition Of Tim Hortons In Potential Tax Inversion Deal

Burger King Worldwide BKW is in talks to acquire Tim Hortons THI, according to a report from The Wall Street Journal. A potential deal would create a tax inversion in which Burger King's headquarters would be located in Canada.

A combination of Tim Hortons and Burger King would create the third-largest quick serve restaurant in the world with over 18,000 restaurants in more than 100 countries with total sales of $22 billion.

Burger King on Monday confirmed it is in talks to purchase the Canadian-based restaurant operator.

In a note to clients on Monday, Joseph Buckley of Bank of America isn't convinced Burger King's main motive is tax related.

"The companies are citing potential benefits from shared services, best practices and global presence," Buckley wrote. "Media reports also mention tax-inversion may be a motivating factor but we note Burger King's tax rate is similar to Tim Hortons."

Buckley also said that the Tim Hortons and Burger King's brands are "complementary as the two have minimal overlap." On the one hand, Tim Hortons is an iconic Canadian brand looking to broaden its presence in the United States, while Burger King's presence has been declining in recent years to 280 locations.

Tim Hortons' core offering centers around breakfast and coffee, while Burger King only has approximately 12 percent of sales in the morning.

Shares of Tim Hortons closed at $61.15 on Friday and were trading as high as $74.00 in Monday's pre-market session. Similarly, shares of Burger King closed at $26.84 on Friday and were trading as high as $32.00 in the pre-market session.

Shares of Tim Hortons are also listed on the Toronto Stock Exchange.