USA loses Burger King BKW & Petro Dollars first rouble oil shipment, Tim Hortons Merger Good For Loonie, gold demand

On August 27 rumblings of a Burger King corporate inversion made the headlines but its significance is far outweighed by another event that transpired the same day:  Russia's Gazprom OGZPY ships the first tanker of oil (80,000 barrels) ever to be sold internationally in a currency other than the US dollar.  The destination ? China via the Siberian Pacific Ocean pipeline connection.

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 acquisitions

California 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.

One is acquiring the other for $11.4/$C12.5 billion ($3 billion in finance from Berkshire Hathaway gives it a preferred stake which pays a higher dividend yield) or $94.05 per share - $65.50 in cash and 0.8025 per share of the new company for each share they own

... 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.

Germany Rebuffs American Companies NSA, US Fed, Russia Gold Reserves At Record High

It's not just soccer that is pitting these two superpowers against one another;
German government cancels contract with America's number two wireless services provider Verizan (nyse:VZ) over allegations the NSA has unrestricted access to all information going through Verizon, regardless of how sensitive that information is.  Germany is deeply concerned about "the ties revealed between foreign intelligence agencies and firms".

Germany versus USA: Who Wins ? Federal Gold Reserves Stay In NY

Also this month, the German government cancelled a previous request to repatriate Fed-held gold reserves, on account of the slow pace / doubts about their whereabouts still prevalent.  The cancellation comes just 1.5 years into a 7 year plan that had called for the return of 87 tonnes per year (374 tonnes from Paris, 300 tonnes from New York), though Germany was getting it back at the rate of only 25 tonnes per year.  What's more, The US Fed returned only five tonnes representing only 8% of what should have been returned.

Russia Replaces US Security Bond Reserves With Physical Gold

Over the last three years Russia has dumped $50 billion in US securities, replacing dollars mainly with gold bars.  In the month of May 2014 alone, Russia purchased 900 thousand ounces of gold ($1.17 billion) bringing its total gold holdings up to 35.5 million ounces (valued at $44.3 billion).  The previous month of April was also a big month for purchases, had been the biggest month for gold purchases by the Russian central bank since 2010.

USA to export first shipment of oil in August 

On June 25, 2014 the Obama administration signs bill lifting previous oil export ban; the ban had been in place to protect US oil supplies.
Over the last few years American oil output increased from 5.5 million to 8.0 million barrels per day, while at the same time US oil consumption fell from 20 million to 18.5 mbpd.  Initially, exports will be limited to condensate from shale produced at Eagle Ford.  Exports could reach 700,000 barrels per day by early next year.  note: shale oil is light oil, making it easier to use in industry; for instance it can be used as aerospace fuel whereas heavy oil cannot.

China Buying Up London

Just this week China Construction Bank paid £110 million for a 123 thousand ft2 seven story building at 111 Old Broad Street.  The building will presumably be its headquarters in Europe and base for yuan clearing bank operations.  This comes one week after China Life paid £795 million for 70% stake in a London office tower.

China Construction Bank is the second biggest bank in China after ICBC.  It has an aggressive overseas expansion plan (in 2013 overseas assets up 40% to $120 billion).