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 Related Links Burger King in Talks to Buy Tim Hortons and Move to Canada 
 
 When Daniel Schwartz took over as chief executive of Burger King last year, he set about pinching pennies. 
 
 Mr. Schwartz, 34, had little affinity for traditional corporate luxuries. So he sold the company jet, ended an annual $1 million party held at an Italian villa and moved executives at the company’s Miami headquarters from posh offices employees called Mahogany Row to an open floor plan full of cubicles. 
 
 Mr. Schwartz further reduced expenses by selling more restaurants to franchise owners, reducing the amount of money and employees needed to run the business. 
 
 This continued a strategy Mr. Schwartz began in 2010, when he led the buyout of Burger King by 3G Capital, a Brazilian investment firm. And it seemed to work. Since Burger King went public in 2012, the company’s value has more than doubled. 
 
 But after years of cutting costs at Burger King, Mr. Schwartz and 3G are now prepared to spend big money on the brand. Burger King is in advanced talks to buy Tim Hortons, a Canadian chain of coffee-and-doughnut shops, for more than $8 billion, in what would be the largest-ever acquisition of a restaurant chain. According to a person briefed on the matter, the billionaire Warren E. Buffett’s Berkshire Hathaway will provide a little less than 25 percent of the deal financing by taking preferred shares. 
 
 If completed, the deal would provide several clear benefits for Burger King and 3G Capital, which would remain the majority owner. But the deal would also steer the company into perilous territory for fast-food restaurants by bringing together multiple brands under one roof. 
 
 Previous attempts at consolidation in the restaurant industry have sputtered. Wendy’s and Arby’s combined in 2008 but split just three years later. Wendy’s also once owned Tim Hortons, but sold it in 2006. 
 
 Darden Restaurants, which owns brands such as Olive Garden and LongHorn Steakhouse, has come under pressure from activist investors, and it sold the Red Lobster chain to a private equity firm this year. In each case, extracting cost savings from a disparate group of brands was easier said than done. 
 
 “The portfolio approach has not worked well in casual dining,” said Lynne Collier, an analyst at Sterne Agee, referring to midprice chain restaurants like those owned by Darden. 
 
 But, Ms. Collier said, portfolios of diverse fast-food brands might be more promising. And instead of simply combining one burger company with another, Burger King appears to be willing to diversify its offerings beyond standard fast-food fare. 
 
 In doing so, Burger King would be aiming to emulate the success of Yum Brands, the company that owns KFC, Pizza Hut and Taco Bell. Yum is among the best-performing restaurant companies in the world, benefiting from strong international sales. 
 
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 Dunkin’ Brands, owner of Dunkin’ Donuts and the Baskin-Robbins ice cream chain, has also demonstrated that a fast-food company can thrive with more than one brand under the same roof. 
 
 In both cases, Yum and Dunkin’ Brands have taken to positioning their restaurants next to each other in some places. “You can line them up side by side in the same building,” Ms. Collier said. 
 
 It is a strategy that would not work with multiple burger chains but might work for Burger King and Tim Hortons. 
 
 And for Burger King, whose investors are eager for continued growth, a big takeover may be the best choice on the menu. 
 
 “At a certain size, you have to look at acquisitions if you want more growth,” Ms. Collier said. 
 
 And Burger King is well positioned to spend now, with its stock riding high after 3G Capital’s operational changes paid off. “Since taking over in late 2010, the new management team has focused intensely on improving the brand image through several initiatives, including restaurant remodels, more attractive menu items, approachable marketing and improved operations,” Alvin Concepcion, a Citigroup analyst, said in a note before news of the potential Tim Hortons deal surfaced. 
 
 By betting on a big deal to expand, Mr. Schwartz and 3G Capital appear to be intent on creating a large international fast-food empire. 
 
 Acquiring Tim Hortons would give Burger King access to a lucrative new revenue stream. Tim Hortons reported almost $3 billion in sales in 2013 and has shown steady growth in recent years. 
 
 Tim Hortons would also give Burger King more exposure to the fast-growing coffee and breakfast food market, which is led by companies like Starbucks and Dunkin’ Brands. 
 
 In addition to giving Burger King exposure to popular new categories, it would help the company withstand pressure it faces from a range of competitors. So-called fast casual restaurants like Chipotle are appealing to a new generation of health-conscious consumers. And regional burger chains, like In-N-Out Burgers, Five Guys and Shake Shack, which is preparing to go public, are taking market share from traditional fast-food chains. 
 
 Finally, buying Tim Hortons would allow Burger King to reincorporate in Canada, which has a lower corporate tax rate. While such a move, called an inversion, may not substantially reduce its overall tax bill, it would give the enlarged company easier access in the future to cash it earned overseas. 
 
 For Tim Hortons, the deal would provide a way forward. Having largely eliminated or marginalized most of its domestic competitors, Tim Hortons now saturates the Canadian market to such an extent that the potential for substantial growth there through new stores is all but gone. Instead, the company is trying to find ways to increase what customers spend. 
 
 “This is a very profitable company,” said Will Mitchell, a professor of strategic management at the University of Toronto Rotman School of Management. “It’s not struggling in terms of profits; it’s struggling in terms of profitable growth.” 
 
 Like many successful Canadian companies, Tim Hortons has long looked to the United States as a place to expand. The result has been mixed, at best. The company is still subsidizing some American franchises and has closed some stores, which are concentrated in the Northeast. 
 
 Niraj Dawar, a professor of marketing at the Ivey Business School at the University of Western Ontario, said that the best prospects for expanding Tim Hortons internationally most likely rested in markets outside the United States, where Burger King is already active. 
 
 “The U.S. market is saturated,” he said. 
 
 “But there are many other markets where Burger King plays where there isn’t this saturation of coffee outlets.” 
 
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 In a statement, Tim Hortons said that its talks with Burger King were being driven by “the potential to leverage Burger King’s worldwide footprint and experience in global development to accelerate Tim Hortons growth in international markets.” 
 
 That sounds remarkably similar to what Tim Hortons hoped for when it was taken over by Wendy’s International in 1996. 
 
 In his autobiography, “Always Fresh,” Ron Joyce, a co-founder of Tim Hortons, said it rapidly became apparent that his company was being dragged down by its new American owner. 
 
 “Wendy’s simply did not perform, leaving Tim Hortons as the company’s only means of growth,” Mr. Joyce wrote. 
 
 Yet Mr. Schwartz and 3G Capital apparently believe they have a strategy that will work where Wendy’s was unable to succeed. 
 
 Another potential stumbling point is Tim Hortons’ prominence in Canada — the elimination of several doughnuts, including the Dutchie, was widely covered this year — meaning that a deal would receive close political and public scrutiny. 
 
 On Tuesday, Peggy Nash, a member of the New Democratic Party, which is the official opposition in Parliament, told reporters that her party would push for a thorough review of any transaction under foreign ownership laws. 
 
 “It seems pretty clear why Burger King would want to move its headquarters to Canada,” she said, referring to potential tax benefits as well as the strong profitability of Tim Hortons. “What’s less clear is what Canadians get out of the deal.” 
 
 Michael J. de la Merced contributed reporting. ||||| With the news that Burger King is in talks to merge with Tim Hortons, customers at a downtown Toronto Timmies were mostly unconcerned about what it would mean for Canada’s most famous coffee shop. 
 
 “As long as the quality doesn’t change, I don’t see a problem,” said Grant McDonald, holding a double-double at the corner of Sherbourne St. and Richmond St. 
 
 “I don’t like to see successful Canadian companies get bought up, but it’s good if it brings more head office jobs here.” 
 
 The proposed new company would be based in Canada, reportedly to save taxes for Burger King, but Tim Hortons would be the minor partner in the merger. Burger King has more than 13,000 outlets worldwide, while Tim Horton’s has fewer than 5,000, most of which are in Canada. 
 
 “Burger King’s not all that big here, so if they bring in that approach it could hurt Tim’s,” said Shawn Basra, who said he grabs a coffee there about twice a week. 
 
 He said it likely wouldn’t change his view of the company’s Canadian appeal, and regardless, he tends to stop in just because it’s convenient. 
 
 “It’s brilliant marketing, that’s all it is. Just marketing. If they keep the same number of locations, I’m sure it’ll be fine.” 
 
 Justin Aguiar also said he stops by a Timmies about three times a week simply because the stores are in the right places. 
 
 “I’m indifferent about the merger,” he said. “I mean, the coffee’s not even all that great here, let’s be honest.” 
 
 Miriam, who comes in every day (and preferred not to give a last name), wasn’t happy about the prospect of Tim Horton’s becoming a global giant. 
 
 “I don’t like it. I guess it’s for tax purposes, I don’t always understand that economic side of it,” she said. “But it would become like Starbucks, I think. I’d probably go more often to Second Cup.” 
 
 Marketing experts say there may be some risk for the brand if Tim Hortons forms a large new company (it would be the third-largest fast food company in the world), but they note it prospered between 1995 and 2006, when it was owned by U.S.-based burger chain Wendy’s. 
 
 “Canadians are getting used to having foreign owners,” said Ken Wong, a business professor at Queen’s University. “What would bother them is if they lost in those brands the distinctively Canadian flavour.” 
 
 Wong said that because this isn’t a case of one restaurant simply buying the other – it would instead be a third-party equity group that controls a new company – he thinks Tim Hortons’ operations in Canada will be largely unaffected. The only big change might come in the U.S., he said, if the company pushes large-scale expansion there. 
 
 A poll on the Star’s website showed there are still many readers worried about new owners, however. As of press time, more than half of 5,000 voters said the merger was a bad idea because “it dilutes Tim Hortons’ Canadian-ness.” 
 
 Carolyn Ray, the managing director of Interbrand Canada, said Tim Hortons is remarkable for how high it scores in the “authenticity” category among Canadians. 
 
 Interbrand releases a “Best Canadian Brands” ranking each year, and in 2014 Tim Hortons was ranked fifth overall, and first in the retail category. 
 
 “It’s hard to name another brand that’s more Canadian and built more into the fabric of our culture,” Ray said. “So I think there is a risk here, but Tim Hortons is extremely savvy about the way they manage their brand, and I think consumers trust it...and it’s an exciting day for Tim Hortons, this really gives them the platform to be a global brand.” 
 
 The overall sentiment from most patrons the Star talked to in Toronto was that they might prefer Tim Horton’s to stay as a smaller, Canadian-focused chain, but the Burger King merger isn’t likely to affect their coffee-shopping habit. ||||| In what could be a whopper of a deal for Tim Hortons, Burger King is in talks to buy the iconic Canadian company. 
 
 A joint statement by the companies says they hope to form a new corporation that would be based in Canada — although they would continue to operate as standalone brands. 
 
 Brazilian investment fund 3G Capital owns a little over two-thirds of Burger King and is effectively proposing to build a Canadian holding company that would own both chains but operate them independently. 
 
 Right now, Burger King is based in Miami; Tim Hortons headquarters are in Oakville, Ont. But the coffee chain only recently returned to its origins as a purely Canadian company. For years, it was owned by U.S. burger chain Wendy's before being spun out in an IPO in 2006. 
 
 This means Tim Hortons is going to go full bore with a huge expansion into the U.S. - Investment manager Barry Schwartz of Baskin Financial 
 
 If a merger is completed, the new company would become the world's third-largest quick-service restaurant chain, with more than 18,000 locations and sales of about $22 billion. 
 
 The markets reacted positively Monday to the possibility. Tim Hortons (TSX:THI) was up 20.97 per cent to close at $83.20 on the Toronto Stock Exchange, while Burger King climbed 20.80 per cent to $32.75 US in New York. 
 
 The companies aren't saying much, but it's clear there's a lot of potential benefits up for grabs. 
 
 Degroote School of Business professor Marvin Ryder says the two companies could be very well suited to help each other. Burger King currently operates in 98 countries around the world, experience the donut chain could certainly lean on. "To have a big brother helping you to open locations, helping to tell you where to locate, what are the good markets... this could be a good partner for them," Ryder said. 
 
 Investment manager Barry Schwartz at Baskin Financial in Toronto likes the deal a lot for both companies. 
 
 "With 3G's backing and smarts, this means Tim Hortons is going to go full bore with a huge expansion into the U.S.," Baskin said, adding that he sees no possible reason for Canadian regulators to kibosh the deal. 
 
 "This would create a large, world-class company based in Canada, and paying taxes in Canada," Schwartz said. "It would also increase the exposure of Canada and the TSX and potentially lead to more [deals] of U.S. and foreign companies coming to Canada." 
 
 Tax savings 
 
 Business commentator Michael Hlinka said on CBC Toronto's Metro Morning on Monday that Burger King may be making a "tax inversion" play with this move. 
 
 The basic U.S. corporate tax rate is about 35 per cent, while Canada's, depending on the province, is around 26 per cent. By merging with a Canadian company and setting up a head office in Canada, U.S. companies can sometimes achieve significant tax savings, Hlinka said. 
 
 "You've got to merge with a company one-quarter your size ... then you can technically set up your headquarters in Canada, even though you still keep everybody in the United States. It's almost like a mailing address more than anything else," Hlinka said. 
 
 A number of U.S. pharmaceutical companies have tried similar moves in recent years, most notably Valeant, which bought up Mississauga, Ont.-based generic drugmaker Biovail in 2010. Valeant was U.S.-based at the time, but is now headquartered in Laval, Que., after buying what was then Canada's largest drug company. 
 
 Pfizer also recently tried to buy AstraZeneca in order to move itself to England, which has a much more favourable tax regime. Two other U.S. drug firms, Medtronic and AbbVie, are also in the process of trying to buy two Irish drug companies, again, largely for tax reasons. 
 
 But it's not just a tax move 
 
 That's not to suggest that taxes are the only factor at play here — Burger King is, after all, trying to get its hands on a successful business in its own right. 
 
 Tim's released earnings on Aug. 6 that beat expectations, and the stock has been rising ever since. Share in Tim Hortons on the TSX had gained almost 15 per cent in the last two weeks even before the Burger King news broke over the weekend. 
 
 Burger King shares have also been doing well, so the deal won't be cheap for 3G — shares in both Tim Hortons and Burger King have never been more expensive. 
 
 Canada's federal corporate tax rate is 15 per cent, and Ontario currently tacks on another 11.5 per cent, putting the total tax bill for a company residing in Ontario at 26.5 per cent. 
 
 Burger King's latest annual report reveals that thanks to some generous tax breaks on overseas profits, the company's effective tax rate last year was 27.5 per cent. Contrast that with the 26.8 per cent tax that Tim Hortons says it paid last year. 
 
 Indeed, beyond any marginal tax savings, Burger King may also be trying to keep pace with a key competitor, Hlinka said. 
 
 "McDonald's has become very serious about making a good cup of coffee in the past several years and Burger King hasn't really stepped up, so maybe this is how they're going to compete with McDonald's globally," he said. 
 
 So what's the upside for Tims? 
 
 "If Tim Hortons gets its coffee into all those Burger King stores worldwide, that would be absolutely huge for it, and I think that might be part of this strategy as well," Hlinka said. 
 
 The company also says any transaction will be structured to deepen the connections each brand has with its customers, franchisees, employees and communities. 
 
 For its part, the federal government cautiously welcomed the news, with a spokesman for Industry Minister James Moore telling CBC News that Canada's recently lowered corporate taxes have made Canada "one of the best country’s in the world to do business." 
 
 NDP Industry critic Peggy Nash said Monday the opposition would seek more details about any possible deal and called for greater transparency under the Investment Canada Act, which covers large foreign takeovers in Canada. ||||| MIAMI (AP) — Burger King is buying Canadian coffee-and-doughnut chain Tim Hortons Inc. for about $11 billion, creating the world's third-largest fast-food company. 
 
 A Burger King sign and a Tim Hortons sign are displayed in Lower Sackville, Nova Scotia, Monday, Aug. 25, 2014. Burger King is in talks to buy Tim Hortons in hopes of creating a new, publicly traded company... (Associated Press) 
 
 The corporate headquarters of the new company will be in Canada, a move that may help Burger King lower its taxes. Burger King will still run its business out of Miami. 
 
 Burger King Worldwide Inc. will pay $65.50 Canadian ($59.74) in cash and 0.8025 common shares of the new company for each Tim Hortons share. This represents total value per Tim Hortons share of $94.05 Canadian (US$85.79), based on Burger King's Monday closing stock price. Alternatively, Tim Hortons shareholders may choose either all-cash or all stock in the new company. 
 
 Tim Hortons stock rose more than 10 percent in Tuesday premarket trading. Burger King's shares fell slightly.
– Burger King is confirming an $11 billion buy of Canada's iconic Tim Hortons coffee chain that will create Earth's third-biggest fast-food company and settle its headquarters in Canada—where corporate tax rates are conveniently around 26%, compared to a basic rate of 35% in the US. The merger looks like a "tax inversion" play, an analyst tells the CBC, explaining that when an American firm merges with a Canadian one, it can sometimes "technically set up [its] headquarters in Canada, even though you still keep everybody in the United States. It's almost like a mailing address more than anything else." Burger King will still run its business from Miami, notes the AP. But there could be a lot more than tax savings to the deal, the New York Times reports. The merger would give Tim Hortons huge opportunities for overseas expansion and would boost Burger King's coffee and breakfast offerings; the combined chain would have 18,000 locations. Tim Hortons was owned by Wendy's for years, until 2006, but some Canadians worry that the new deal will end up diluting the chain's Canadian-ness. "You know, Tim's is already pretty corporate," a customer at a Toronto outlet tells the Toronto Star. "But it still does have that nice Canadian vibe."