The Toronto stock market was positive Monday amid a major, potential acquisition involving one of Canada’s most iconic companies.
Burger King is in talks to buy Tim Hortons in hopes of creating a new, publicly traded company with its headquarters in Canada. With a new base in Canada, Burger King, now based in Miami, could shave its U.S. tax bill. Tax inversions have become increasingly popular among U.S. companies trying to cut costs. The majority owner of Burger King, 3G Capital, would own the majority of shares of the new company.
It’s not known what such a deal would be worth, but both stocks surged. The prospect of Burger King racking up big tax savings helped send its share up 16.34 per cent to $31.54 (U.S.) in New York.
And Tim Hortons jumped 19.9 per cent to $75.35 (Canadian) in Toronto as Burger King considers buying a very successful quick service restaurant business.
“They have an embedded base of profitability and strength that exists in the Canadian business and has been the foundation of that company and that stock for a very long time,” said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.
“It (would) create a very major player, a top three player in the quick serve space. A space obviously that McDonalds has enjoyed the leadership in for a long time.”
The S&P/TSX composite index gained 60.41 points to 15,595.96, held back by the gold sector as bullion prices fell back.
The Canadian dollar was off 0.21 of a cent to 91.16 cents (U.S.).
U.S. indexes were also higher, despite new home sales figures that missed expectations. Sales in July were 412,000 versus the 430,000 that economists expected.
The Dow Jones industrials ran ahead 109.18 points to 17,110.4, the Nasdaq up 27.03 points to 4,565.58 and the S&P 500 index cracked the 2000-mark for the first time during the morning, up 12.4 points to 2,000.8.
Sentiment was helped along by top central bankers who said support for their economies would continue and additional help is possible.
European Central Bank president Mario Draghi told the Federal Reserve’s economic symposium Friday that the bank is considering asset purchases to pump more money into Europe’s economy, though he gave no guidance on when that help would happen.
Also at the Fed meeting, central bank chairwoman Janet Yellen offered no signal that she’s altered her view that the economy still needs support from the Fed.
The TSX financials group gained 0.47 per cent ahead of earnings reports coming in this week from most of the big Canadian banks. Royal Bank posted a better than expected report and a dividend increase on Friday but the showing failed to push its stock higher.
“Expectations are high and even against a very solid performance, you have to weigh the performance of the stock price against the expectations that are embedded,” added Fehr.
The TSX base metals group also lifted the TSX, up 0.3 per cent, while September copper was ahead a penny at $3.22 (U.S.) a pound.
The energy group edged up 0.3 per cent, while October crude in New York declined 29 cents to $93.36 a barrel.
The gold sector led decliners, down 1.1 per cent while December gold nudged $3.10 lower to $1,277.10.