The acquisition would create the third-largest fast-food company in the world and allow Burger King to move its headquarters to Canada, which would shave a couple of percentage points off its corporate tax rate.
The move isn't surprising considering the recent shift in Burger King's strategy since its new CEO took over last year.
Daniel Schwartz, 33, had a background in private equity — not fast food — when he took the helm at Burger King in June 2013.
After surrounding himself with a young management team — including a 28-year-old chief financial officer — Schwartz began implementing deep cost-cutting measures to help the struggling burger chain generate more cash.
Under the direction of Burger King's parent company, 3G Capital, Schwartz has helped reduce Burger King's corporate headcount from to 2,425 from 38,884 by refranchising restaurants, meaning those workers now report to franchise owners.
He has axed many executive perks, including lavish offices that employees called "Mahogany Row" and a $1 million annual party at a chateau in Italy, according to Businessweek.
Schwartz has also negotiated deals with restaurant operators in Brazil, China, and Russia, which have helped grow the number of Burger Kings worldwide by 12% to 13,667 over the past year. A merger with Tim Hortons would help both chains grow faster worldwide.
Under Schwartz, in the first quarter of this year, Burger King's same-store sales increased 2% and net income nearly doubled to $60.4 million.
Combined, Burger King and Tim Hortons would be worth about $18 billion and have more than 18,000 restaurants in 100 countries.
The possible merger signals that Burger King "is on a trajectory to significantly reshape the [fast food] industry," Morgan Stanley analysts wrote in a research note on Monday.
Tim Hortons alone is worth about $8.4 billion. It's the largest coffee chain in Canada with 4,546 restaurants, including 866 in the U.S. The map below shows Hortons' locations in the U.S. and Southern Canada.
The chain says it sells eight out of 10 cups of coffee in Canada, where it has 3,630 outlets. That's equal to about 36,000 locations in the U.S. on a per capita basis, which is double the number of McDonald's in the U.S., according to the New York Times .
Tim Hortons' same-store sales grew 2.6% in Canada and 5.9% in the U.S. in the most recent quarter. Traffic has been declining for nine consecutive quarters in Canada, however, and it was flat in the U.S. last quarter, compared to the previous year.
The company says it has been investing in new menu items and healthier, fresher ingredients to attract new customers.
"We have identified some key trends we are seeing in the market, including changing demographics, increased emphasis on nutrition, health, and wellness and a desire for bold flavors along with fresh, quality ingredients," Tim Hortons CEO Marc Caira said on a recent earnings call.
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