Summary – Case Study Example
Task: Article summary “Tim Horton’s takeover by Burger King may be bad for Canada: study” Burger King is a company that deals in fast food production (primarily, hamburger). The company operates a large chain of stores across the United States. Burger King was founded in 1953 and it is headquartered in Miami-Dade County, Florida. On the other hand, Tim Hortons is a global restaurant that also produces fast food (coffee and doughnuts). The company was established in the year 1964 and it has its headquarter in Oakville, Ontario, Canada. The Burger King plans to acquire Tim Hortons. According to the article, the takeover poses negative consequences for Canadians due to a possible employee dismissal in a bid to cut the operating costs. The article mentions that the takeover is to be financed by debt of $ 14 billion from 3G Capital. The takeover is estimated to cause a dismissal of over 700 employees, representing a 44% decrease (CBC NEWS par. 1-19).
The article mentions that 3G Capital takeovers have a history of joblessness as in the case of Heinz and Labatt in which 740 and 140 jobs were lost respectively. The main reason for the layoffs is the high cost of capital (debt). Thus, companies implement cost reduction strategies which include the reduction of payroll costs. Despite the mentioned negative influence anticipated after the takeover, the competition Bureau of Canada supported the acquisition. The article categorizes the acquisition as the largest to be financed using debt in a transaction involving Canada and the U.S. Thus, the payment of interest on the loan will draw a substantial amount of money from the acquiring firm. As a result, the profitability level of the merged firm is bound to reduce significantly (CBC NEWS par. 1-19).
CBC NEWS, 2014, Tim Hortons takeover by Burger King may be bad for Canada: study. Web. 21 Jan. 2015. http://www.cbc.ca/news/business/tim-hortons-takeover-by-burger-king-may-be-bad-for-canada-study-1.2818036