Jay StrubbergAfter Burger King's $11 million acquisition of Canadian coffee-and-donut chain Tim Hortons Tuesday, the now third-largest fast-food company in the world is having to defend the merits of the merger.
The prevailing theme in headlines is pretty obvious: is Burger King's takeover of Hortons and subsequent relocation to Canada all about avoiding the much higher U.S. corporate tax rate?
Burger King's executive chairman insists that's not the case. He's quoted in The Wall Street Journal saying, "This is not a tax-driven deal. It is fundamentally about growth and creating value through accelerated expansion."
And the tax breakdown does seem to support him, despite the media largely accusing the fast-food chain of buying up Hortons just to avoid paying U.S. taxes. Why? Well, because Burger King is already paying lower taxes.
According to tax audit firm KPMG, the total Canadian corporate tax rate is actually just above 26 percent — not just the 15 percent for the federal portion that's widely cited. In 2013, Burger King nearly matched that percentage due to a lower tax rate mixture because it has so many locations across the globe.
In the deal finalized Tuesday, the Burger King-Horton merger effectively creates a $23 billion fast-food powerhouse with more than 18,000 locations in 100 countires.
One of the key ingredients that helped ink the final deal was some financial backing from business mogul Warren Buffett.
The Berkshire-Hathaway executive pitched in $3 billion to help Burger King expand its global presence, though both he and Burger King have obviously been facing some heat over the deal.
But best-selling author and host of CNBC's Squawk Box Andrew Sorkin says Buffett's company will actually end up paying the right amount of U.S. taxes for any money it makes from the merger.
CNBC: "Instead of Berkshire Hathaway paying traditionally around 14 percent on those dividends, they're going to be paying the full 35 percent because it's a foreign company distributing dividends to the United States."
Regardless, the company's announcement was met with some harsh public backlash on Facebook. One user wrote, "Lame. Same thing just putting a spin on it. I've eaten my last whopper." And another said, "I'm not boycotting your product, I'm merely relocating my loyalties."
It remains to be seen if the bad press or boycott threats will have any long-term affect on either company. Both Burger King and Tim Hortons' stock jumped after the merger announcement and have remained relatively steady since then.
This video contains images from Getty Images.
