Inancial management;Mergers and Acquisition.
On 24 August 2014, a takeover of Tim Hortonas (a Canadian coffee and doughnut chain) by Burger King was announced. The following day, shares of Tim Hortonas were up nearly 20 percent at $75.23 on the New York Stock Exchange, while Burger King rose more than 17 percent to $31.83. The companies, whose market values are comparable in size, said the new entity would be based in Canada. Hence Burger King will denounce its corporate citizenship in the United States.
1. Discuss the synergies that Burger King hopes to achieve from the merger. [5 marks]
2. Discuss the synergies that Tim Hortonas hopes to achieve from the merger. [5 marks]
3. Describe tax inversion in relation to U.S. corporations and present arguments why this merger may not be motivated by tax inversion. [10 marks]
4. Compare the quarterly performance of the two companies in terms of revenue trend, earnings growth and price-earnings ratio over the past 2 years. Comment on the relative bargaining power of the two companies in the merger negotiation. [10 marks]
Students are required to answer a minimum of 1,400 words (total for all parts), and to provide a minimum of 12 references. [Total 30 marks]