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Ottawa approves Tim Hortons-Burger King deal

Burger King french fries stuffed into a Tim Hortons coffee cup outside a Burger King in Richmond, B.C., on Aug. 26.

John Lehmann/The Globe and Mail

The federal government is approving Burger King Worldwide Inc.'s $12.5-billion takeover of Tim Hortons Inc., but has made the U.S. fast-food giant agree to list of conditions that include maintaining Canadian jobs and reserving half of the Tim Hortons brand's board seats for Canadians.

Industry Minister James Moore announced Thursday that Burger King's proposed merger – publicly unveiled in August – had been approved under the Investment Canada Act, which mandates that foreign takeovers of large Canadian companies must produce a "net benefit" to Canada.

The conditions attached to the takeover appear aimed at ensuring that Canada reaps the benefits of being the new home to a worldwide fast-food company. It's a takeover deal to which the federal government has repeatedly pointed as evidence that its lower corporate tax rates are attracting businesses.

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"The result of this transaction is this new global company, with sales of more than $23-billion annually, which will now be based in Canada," Mr. Moore said in his statement. "Our government is pleased to see companies like Burger King investing in Canada's economy and looking to benefit from our low taxes and open markets."

In his statement, Mr. Moore said that Burger King had agreed to several commitments, including "to work with Tim Hortons franchisees to maintain 100 per cent of existing employment levels at Tim Hortons franchises across Canada."

Burger King, owned by Brazilian private equity fund 3G, has been well-known in recent years for slashing its own costs and staff, and some observers had speculated that Tim Hortons could face similar treatment.

Mr. Moore also said Burger King had agreed not to change the rent and royalty structure for its Canadian franchisees for five years.

The burger chain has also agreed to "significantly" accelerate its plans to expand Tim Hortons in the U.S. and around the world and to maintain the doughnut chain as a "distinct brand without any co-branding locations in Canada or the United States."

Burger King has committed to setting up the new merged company's headquarters in Oakville, Ont., where the Tim Hortons head office is now, and "to maintain significant employment levels" there as well as to list the new company on the Toronto Stock Exchange. The board of the new company's Tim Hortons subsidiary will have at least 50 per cent Canadian directors, Mr. Moore said.

In August, the two companies had both said the new merged entity would be headquartered in Canada. The move, characterized as a "tax inversion," would make it possible for the new company to bring overseas profits back home without having to pay U.S. taxes on them.

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In a commitment that echoed company comments in August, Mr. Moore said Thursday that the new company will also maintain "100 per cent of Tim Hortons' current charitable work and involvement in communities across Canada," which presumably includes its sponsorship of children's hockey programs.

Editor's Note: An earlier version of this story said that Burger King had agreed that half of the board seats for the new merged company would go to Canadians. In fact, Burger King has agreed to ensure that Canadians make up at least 50 percent of the membership of the board of directors for the "Tim Hortons brand," not the new merged parent company.

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About the Author
Toronto City Hall Reporter

Jeff Gray is The Globe and Mail’s Toronto City Hall reporter. He has worked at The Globe since 1998. From 2010 to 2016, he was the law reporter in Report on Business, covering Bay Street law firms and white-collar crime. He won an honourable mention at the National Magazine Awards for investigative journalism in 2010. More


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