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

Red Deer woman target of robbery in broad daylight, near police station

Walking home, in broad daylight, Barb Smith never thought for a minute… Continue reading

Red Deer County developing regional plans

Red Deer County must prepare 14 intermunicipal agreements according to new provincial rules

Tsunami warning for B.C.’s coast is cancelled after Alaska quake

VANCOUVER — A tsunami warning issued for coastal British Columbia was cancelled… Continue reading

Sewage spill shuts beaches along California’s Central Coast

MONTEREY, Calif. — Nearly 5 million gallons of sewage spilled into the… Continue reading

WATCH news on the go: Replay Red Deer Jan. 21

Watch news highlights from Red Deer and Central Alberta

RDC chosen to host 2019 men’s volleyball national championship

Sports enthusiasts in Red Deer will have more to look forward to… Continue reading

Police is still looking for Second World War army passport owner

No one has claimed a rare Second World War German army passport… Continue reading

DJ Sabatoge and TR3 Band kick off Sylvan Lake’s Winterfest 2018

Central Alberta’s youngest DJ will open for TR3 Band kicking off Town… Continue reading

Two Canadians, two Americans abducted in Nigeria are freed

Kidnapping for ransom is common in Nigeria, especially on the Kaduna to Abuja highway

WATCH news on the go: Replay Red Deer Jan. 21

Watch news highlights from Red Deer and Central Alberta

Liberals quietly tap experts to write new paternity leave rules

Ideas include creating an entirely new leave benefit similar to one that exists in Quebec

Insurers say Canadian weather getting hotter, wetter and weirder

Average number of days with heavy rain or snow across Canada has been outside norm since spring 2013

Are you ready for some wrestling? WWE’s ‘Raw’ marks 25 years

WWE flagship show is set to mark its 25th anniversary on Monday

Most Read


Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month