Tim Hortons takeover is a bad deal for Canadians: study

October 30, 2014

OTTAWA—Burger King's proposed takeover of Tim Hortons is likely to have overwhelmingly negative consequences for Canadians, says a study released today by the Canadian Centre for Policy Alternatives.

The study analyzes Burger King's private equity owner, 3G Capital's, past takeovers of Burger King, Heinz, and Anheuser-Busch and finds it has a 30-year history of aggressive cost cutting, which will hurt Tim Hortons employees, small-businesspeople, Canadian taxpayers, and consumers.

"3G Capital has a well-established post-takeover playbook of cost cutting and mass layoffs, and the billions in new debt to finance the acquisition will create enormous pressure for changes at Tim Hortons," says CCPA Senior Economist David Macdonald.

According to the study, there could be:

  • layoffs of hundreds of workers;
  • from $355 to $667 million in lost tax revenue for Canadian governments in the deal's first five years;
  • higher costs and more risk for small-business franchise owners;
  • worse products and higher prices for consumers; and
  • minimal economic benefits to Canada from global growth.

According to the study, the primary justification for the merger from a Canadian perspective—the global expansion of the Tim Hortons brand—does not offer much to Canadians because the master franchising model 3G Capital plans to use is unlikely to generate economic activity at home. In addition, few Burger King jobs, if any, will migrate to Canada given that Burger King's headquarters will remain in Miami.

"Burger King's acquisition of Tim Hortons must create a 'net benefit' for Canada in order to win approval under the Investment Canada Act. Tim Hortons is already a successful business that does not need to be rescued, and Burger King's owners have disclosed few benefits to Canada," says Macdonald. "The federal government must demand a better deal for Canada if it is to consider approval."

Tim Hortons and Burger King announced an agreement to merge the two restaurant chains in August of this year. The Competition Bureau of Canada cleared the merger yesterday but the deal still needs approval under the Investment Canada Act. If approved, 3G Capital will control the merged com­pany and install one 3G partner as board chair and another as CEO. The deal is financed with C$13.7 billion in debt and preferred equity, making it the largest restaurant lever­aged buyout in U.S. and Canadian history.


Trouble Brewing: Why the Tim Hortons Takeover is a Bad Deal for Canadians is available on the CCPA website: http://policyalternatives.ca

For more information contact Kerri-Anne Finn, CCPA Senior Communications Officer, at 613-563-1341 x306.