December 4, 2014 5:11 pm
Updated: December 5, 2014 11:29 am

Ottawa gives Burger King go-ahead for Tim Hortons takeover

Burger King announced in August it will acquire Tim Hortons and re-locate to Ontario.

CANADIAN PRESS/Sean Kilpatrick
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The federal government has approved Burger King’s multibillion-dollar acquisition of Tim Hortons Inc.

Industry Canada, the federal department reviewing the mega-merger, said in a statement it won’t oppose the deal, provided Burger King agrees to about half a dozen “commitments” including a pledge to maintain “100 per cent” of existing employment at Canadian franchises.

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“Burger King’s application to acquire control of Tim Hortons has been approved,” Industry Minister James Moore said in a statement. The approval was the final regulatory hurdle in Canada, while company officials have said the takeover could be finalized before the end of the year. (UPDATED, see here)

Commitments

Other conditions the U.S.-based fast-food giant must abide by include plans to expand Tims locations in the U.S. and internationally “at a significantly greater pace than currently planned.”

MORE: With Burger King’s help, Tim Hortons poised to go global

The merged company must also be based in Oakville, Ont., where Tim Hortons is currently headquartered. Burger King, based in Miami, Florida, must “maintain significant employment levels at that [Canadian] facility,” Industry Canada said.

Additional commitments include continuing Tim Hortons’ charitable work, operating Tims as a “distinct” brand apart from Burger King and a promise to keep rents and fees currently paid by Canadian franchisees frozen for a five-year period.

MORE: ‘Painful changes’ await Tim Hortons under new owners, report warns

The $12.5-billion blockbuster bid was first announced in August. As a rule, Industry Canada reviews any foreign takeover over a certain value to determine whether the deal is a “net benefit” to the country.

“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,” Moore said.

Burger King has said its chief aim is to grow the combined company by taking the Tim Hortons brand to countries around the world — a model it has succeeded at with its own restaurants in recent years. Experts suggest the company will benefit from a lower tax rate in Canada.

Some critics have warned that Burger King’s owners, Brazil-based 3G Capital, will implement deep cost cuts at Canada’s biggest coffee chain.

In separate review, the Competition Bureau gave its consent in late October on the grounds that “a large number of competitors” still face off against Tims and Burger King in Canada, while there’s also “low barriers to entry in the fast food industry” for would-be rivals to join in.

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WATCH: How much will Tim Hortons change under Burger King’s ownership? 

 

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