Tim Hortons takeover by Burger King may prove stale for Canadians: study

Widespread layoffs and strict cost-cutting measures could befall Tim Hortons if Burger King’s parent company takes over the chain, says a study from the Canadian Centre for Policy Alternatives.

TORONTO — Widespread layoffs and strict cost-cutting measures could befall Tim Hortons if Burger King’s parent company takes over the chain, says a study from the Canadian Centre for Policy Alternatives.

The left-leaning think-tank released a scathing review of 3G Capital’s past takeovers on Thursday and concluded that the Brazilian private equity firm’s track record is predictive of “overwhelmingly negative consequences for Canadians” and the Tim Hortons restaurant chain.

“Without additional strong assurances from 3G Capital that no jobs will be lost … this may not be in the net benefit of Canada,” said CCPA senior economist David Macdonald, who was involved in the preparation of the report.

The policy centre said 3G Capital hasn’t made a suitable case for how the merged company benefits Canadians and it’s urging the federal government to demand “a better deal” before it approves the transaction.

Included in its analysis is the assumption that the investment company, in its US$11-billion takeover of the Canadian company, would follow a similar playbook to past takeovers.

The report suggests 3G Capital’s debt financing could force Tim Hortons (TSX:THI) to layoff more than 700 employees — or 44 per cent of staff working outside its restaurants — as its tries to manage the debt of the merged company.

The new obligations could pressure Tim Hortons to cut costs, reduce investments and squeeze more from its franchisees, the report said.

The expectations are based on the investment company’s track record in past takeovers where thousands of employees were laid off at food company Heinz and beer company Anheuser-Busch.

While Burger King’s parent company promised to keep the headquarters of Tim Hortons in Oakville, Ont., the report said there have been “grossly inadequate” workforce commitments that have left no guarantees when it comes to overall employment levels or potential mass layoffs.

Earlier this week, Canada’s Competition Bureau approved the takeover plan to buy Tim Hortons, saying it’s unlikely to reduce competition due, in part, due to the large number of fast food competitors.

While Tim Hortons and Burger King have promised the merger will allow the fast food companies to grow in the U.S. and internationally, the study raises concerns about how 3G Capital could respond if everything doesn’t go according to plan.

“If the preferred strategy of expansion in the U.S. doesn’t pan out, which has been a longtime problem for Tim Hortons, one of the fastest ways to extract value is by squeezing Tim Hortons,” he said an interview.

Some of the possible options to reduce expenses would be to spin off Tim Hortons’ distribution and manufacturing centres to a third partly, which could change the quality of its coffee beans or at least give it less control over the process.

The report also suggests the investment firm could shuffle around finances in order to pay fewer taxes in Canada, which could cost the Canadian government between $355 million and $667 million in lost tax revenue over the deal’s first five years.

In response to the study, Tim Hortons spokesman Scott Bonikowsky said the merged company intends to keep the Tim Hortons brand independent of its owner and maintain “traditional levels of community support, restaurant-level jobs and franchisee relationships.”

Since the Tim Hortons merger was announced in August, some analysts and franchisees have raised concerns over 3G Capital’s reputation for stripping the assets of acquired companies to boost profits.

Desjardins analyst Keith Howlett published a note at the time questioning the “unusual ending to a two-year CEO search and strategic plan” with a takeover from a burger chain.

Just Posted

UPDATED: STARS Lottery is back

Lacombe STARS patient tells his story

Former Red Deer man named Mr. Gay Canada

To compete in Mr. Gay World

Sylvan Lake council adopts waterfront plan

Sustainable Waterfront Area Redevelopment Plan to guide development for next 20 years

Two people die in Rocky-area collision

Rocky Mountain House RCMP investigate

RDC launches week of activities focusing on student mental health

Learners invited to join the discussion at #MakeSomeTimeRDC

Trudeau says politicians shouldn’t prey on Canadians’ fears

The Prime Minister was speaking at a townhall in Ontario

Netflix rejects request to remove Lac-Megantic images from ‘Bird Box’

At least two shows on Netflix’s Canadian platform briefly use actual footage of the 2013 tragedy

Teen vaping is an epidemic: US government

E-cigarettes are now the top high-risk substance used by teenagers, outpacing cigarettes, alcohol, marijuana

‘I never said there was no collusion,’ Trump lawyer says

President Donald Trump’s lawyer Rudy Giuliani says he has ‘never said there was no collusion’

Body of Canadian miner found after African kidnapping

Kirk Woodman’s body was discovered 100 kilometres from the site where he worked for Progress Mineral Mining Company in Burkina Faso

Canada’s Conners on his way to full PGA Tour card with fast start to 2019 season

Corey Conners was working on his putting last Friday when fellow Canadian… Continue reading

Canada’s Milos Raonic, Denis Shapovalov advance at Australian Open

MELBOURNE, Australia — Canada’s Milos Raonic and Denis Shapovalov have advanced to… Continue reading

Study finds more than half of food produced in Canada wasted

The study released Thursday is the world’s first to measure food waste using data from industry and other sources instead of estimates

AP Exclusive: A peek at how Disney resort shows are made

LAKE BUENA VISTA, Fla. — With excitement building over a new “Star… Continue reading

Most Read