Recent months have seen a lot of so-called "tax inversion" deals, in which US corporations merge with foreign companies and then relocate their head offices offshore in order to avoid the 35% US corporate income tax rate. Today we hear of another such deal: Burger King is in merger talks with the Canadian "coffee" chain Tim Hortons. If the deal goes ahead, the combined company would be headquartered in Canada, where the corporate tax rate is currently 15%.
I don't presume to tell Burger King how to run its business, but may I point out the downside to this deal? OK, you may save a whole heap of tax, but you end up owning Tim Hortons. Has any one at Burger King ever tried a Timmy's "coffee"? A friend once commented that it tasted like water that's been used to wash coffee cups. It's no accident that the most popular brew at Tim's is the "double double", in which unhealthy quantities of cream and sugar are added to the paper cup in the hope of making the contents palatable.
Then there's the food. The chain has moved beyond the range of stodgy donuts that it started out with, and now offers a range of unpalatable breakfast and lunch items. Sliced bread toasties masquerading as "paninis", dry muffins, things like that. In trying to expand into the US, Tim's has styled itself as a "cafe and bake shop" rather than a coffee shop, but it's having trouble winning market share.
At a time when older fast food outlets like Burger King and even Mickey D's are losing business to more upscale offerings like Chipotle, it makes no operational sense whatsoever for BK to acquire a mature business that ranks as low on the quality scale as Tim's. As if to emphasize that the deal is purely tax driven, the companies have already made it clear that if the merger goes ahead, the two businesses will operate separately. Some consolation there for the BK customer, then: they're not going to force you to drink Tim's coffee.
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