A Sign Of Things To Come - veering away from Petro Dollars
In addition to this, two other shipments headed for Europe are also reported to involve roubles. If you don't have roubles don't fret - Gazprom also accepts Chinese Yuan ! It's unclear as to whether or not this move was made in response to recent sanctions since China and Brazil are also attempting to do the same thing.Russian Rouble forex rate falls to Record Low
On August 29 the rouble fell to 37:1 versus the US dollar, the lowest exchange rate seen since the Russian currency was restructured in 1998.America Continues To Lose Big Name Companies - Burger King a Canadian Restaurant Chain ?
The second last weekend of the summer couldn't have ended soon enough for Burger King BKW and InterMune ITMN - mergers and acquisitionsCalifornia based InterMune a leader in therapies targeting lung conditions, was acquired by Switzerland's Roche RHHBY for $8.3 billion.
The same day it was also announced that Burger King is in talks to buy Tim Hortons THI in a corporate inversion - merged company uses the move to change country of domicile - New Canadian headquarters presumably will be in Oakville.
Oakville has the sixth-lowest business tax rate among two-dozen Greater Toronto Area municipalities, will be scouted as a potential location. Last year, federal and state income taxes represented 34% of profits at Burger King.
... however, Canadian taxes may not be the issue
Daniel Schwartz, Burger King’s C.E.O. added, “We don’t expect there to be meaningful tax savings, nor do we expect there to be meaningful changes to our tax rate.” Last year Tim Hortons effective tax rate was virtually the same as the US rate of 27.5%.
Other reasons why the company is relocating - Two-thirds of the combined company's revenue will come from Canada, with 20% from the U.S. and 13% from the rest of the world. Tim Hortons is underleveraged meaning they can borrow against those assets -> this will enable the new company to make even more acquisitions !
What allows BKW to transfer its headquarters to Canada is this : under US tax law, if the US company transfers more than 20% of its shares to the foreign firm it can switch its tax jurisdiction.
The Canadian corporate tax rate of 26% compares favorably to the 35% rate stateside - last year Burger King paid a rate of 27%. Canada has the second lowest tax rates in the G7. "total tax costs are up to 40% lower in Canada versus the USA". you see, overseas income is only taxed when it's brought back to the country of domicile.
Burger King is undergoing tremendous growth abroad, something that Tim Hortons has been trying to do over the last few years, unsuccessfully - 859 of the 879 non-Canadian locations are in the United States.
BKW is the larger of the two brands (13,000 restaurants vs 4600 Tim's) but the bulk of its restaurants are franchised, meaning corporate revenue isn't as strong as it is at Tim Hortons (for instance Burger King Canada is not even a part of the company ! it was sold by 3G Capital back in 2013). Although BKW net earnings doubled last year (117.7-> 233.7 million) it has yet to match that of Tim Hortons ($424.37 million, up 5% in 2013).
After the deal is completed, Burger King can leverage Tim Hortons ability to tap the breakfast, coffee and snack market, making it more competitive with McDonald's.
Tim Hortons THI has always been a great investment - company brass have always been open to partnerships with other fast food industry players. Previously they were involved Cold Stone Creamery and before that, Wendy's. Some say that the ice cream partnership didn't work out (cost Tim's $19 million to terminate the deal but it did last a few years) however if done right, this one could actually work !
Brazil's 3G Capital will be the company's largest shareholder (51% of combined company; was 70% pre-merger). 3G also controls iconic Canadian beer maker Labatt Breweries.
