Burger King swallows Tim Hortons for $11 billion

MIAMI - Burger King (BKW) is buying Canadian coffee-and-doughnut chain Tim Hortons (THI) for about $11 billion, creating the world's third-largest fast-food company.

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.

The combined company will have more than 18,000 locations in 100 locations worldwide, according to Burger King.

"Over the past four years, we have transformed Burger King into one of the fastest-growing and most profitable QSR businesses in the world, through successful international growth, a consistent focus on brand revitalization and strong commitment to our franchisees," said Burger King CEO Daniel Schwartz in a statement. "We are excited to build on this progress as we continue to expand Burger King around the world and look forward to working with and learning from Tim Hortons as we together create the world's leading global restaurant business."

Burger King 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.

A growing number of American companies are moving to buy foreign companies in order to establish their legal residence abroad. The procedure, known at an "inversion," can help companies reduce their U.S. tax bill.

But the maneuver has drawn opposition from the Obama administration and from critics who decry it as a tax dodge. Sen. Sherrod Brown, D-Ohio, on Monday proposed a boycott of Burger King if it completes the deal for Tim Hortons.

"Burger King has always said 'Have it Your Way'; well my way is to support two Ohio companies that haven't abandoned their country or customers," Brown said in a statement.

Burger King, which has about 14,000 locations, has been striking deals to open more locations in developing markets. The company sees plenty of room for growth internationally, given the more than 35,000 locations McDonald's (MCD) has around the world.

Tim Hortons has more than 4,500 locations, mostly in Canada. Back in the U.S., breakfast and coffee have been hot growth areas in the fast-food industry.

Between 2007 and 2012, breakfast grew faster than other segment in the restaurant industry at about 5 percent a year, according to market researcher Technomic. But it has long remained a weak spot for Burger King. McDonald's led the category with 31 percent of the market in 2012, while Burger King had just 3 percent to 4 percent, according to Technomic.

Tim Hortons stock rose more than 10 percent in Tuesday premarket trading. Burger King's shares rose 5.25 percent, to $32.40.