TORONTO - The Toronto stock market was positive Monday amid a potential acquisition involving one of Canada's most iconic companies.
Burger King is in talks to buy Tim Hortons in hopes of creating a new, publicly traded company with its headquarters in Canada. With a new base in Canada, Burger King, now based in Miami, could shave its U.S. tax bill. Tax inversions have become increasingly popular among U.S. companies trying to cut costs. The majority owner of Burger King, 3G Capital, would own the majority of shares of the new company.
It's not known what such a deal would be worth, but both stocks surged. The prospect of Burger King (NYSE:BKW) racking up big tax savings helped send its shares up 21.54 per cent to US$32.95 in New York.
And Tim Hortons (TSX:THI) jumped 21.7 per cent to C$76.47 in Toronto as Burger King considers buying a very successful quick service restaurant business.
"They have an embedded base of profitability and strength that exists in the Canadian business and has been the foundation of that company and that stock for a very long time," said Craig Fehr, Canadian markets specialist at Edward Jones in St. Louis.
"It (would) create a very major player, a top three player in the quick serve space — a space obviously that McDonalds has enjoyed the leadership in for a long time."
The S&P/TSX composite index looked set to close at another record high, up 78.54 points to 15,614.09, held back by the gold sector as bullion prices fell back.
The Canadian dollar was off 0.28 of a cent at 91.09 cents US.
U.S. indexes were also higher, despite new home sales figures that missed expectations. Sales in July were 412,000 versus the 430,000 that economists expected.
The Dow Jones industrials ran ahead 83.32 points to 17,084.54, the Nasdaq was up 17.94 points to 4,566.49 and the S&P 500 index was ahead 9.32 points at 1,997.72 after earlier cracking the 2,000-mark for the first time in morning trading.
Sentiment was helped along by top central bankers who said support for their economies would continue and additional help is possible.
European Central Bank president Mario Draghi told the Federal Reserve’s economic symposium Friday that the bank is considering asset purchases to pump more money into Europe’s economy, though he gave no guidance on when that help would happen.
Also at the Fed meeting, central bank chairwoman Janet Yellen offered no signal that she’s altered her view that the economy still needs support from the Fed.
The TSX financials group gained 0.5 per cent ahead of earnings reports coming in this week from most of the big Canadian banks. Royal Bank (TSX:RY) posted a better than expected report and a dividend increase on Friday but the showing failed to push its stock higher.
"Expectations are high and even against a very solid performance, you have to weigh the performance of the stock price against the expectations that are embedded," Fehr said.
The TSX base metals group rose 0.5 per cent as September copper was ahead a penny at US$3.22 a pound.
The energy group edged up 0.55 per cent, while October crude in New York declined 33 cents to US$93.32 a barrel.
The gold sector led decliners, down one per cent as December gold nudged $1.30 lower to US$1,278.90.
