MIAMI – The fight for the coffee and breakfast crowd is heating up, at home and abroad.
Burger King said Tuesday it will buy Tim Hortons in an $11 billion deal that would create the world's third-largest fast-food chain.
The company is hoping to turn the coffee-and-doughnut chain into a household name outside Canada – and give itself a stronger foothold in the booming morning business.
Alex Behring, Burger King's executive chairman, said the new company would be one of the fastest-growing fast-food chains in the world.
The international ambitions for Tim Hortons echo the strategy Burger King's owner, 3G Capital, has applied to Burger King since buying the hamburger chain in 2010. Given Burger King's struggles in the U.S., the investment firm has focused on opening more locations in countries such as China and Russia by striking deals with local franchisees.
Last year, for example, 3G accelerated expansion and opened 670 Burger King locations. Burger King now has nearly 14,000 locations globally.
In the U.S., Tim Hortons could give Burger King another way to tap into the attractive coffee and breakfast markets, which have been dominated by players including McDonald's, Dunkin' Donuts and Starbucks. Marc Caira, CEO of Tim Hortons, noted the Canadian chain's recent efforts to make a bigger push into the U.S., including updated store designs that feature couches and fireplaces.
Caira said he believes Tim Hortons could “win much quicker” in the U.S. with the help of Burger King. Most of Tim Hortons' more than 4,500 locations are in Canada; 866 of them are in the U.S. Last year, Tim Hortons' U.S. sales rose 1.8 percent at established locations.
Winning over customers will nevertheless be a challenge for Tim Hortons, considering the chain's lack of name recognition in the U.S.
Competition in the mornings has also been intensifying. Taco Bell, for instance, recently launched a national breakfast menu, and Starbucks revamped and expanded its breakfast offerings. McDonald's has said it plans to put more marketing muscle behind breakfast to defend its leadership position.
After the deal, which is expected to close by early next year, Burger King and Tim Hortons said the new company would have about $23 billion in sales and more than 18,000 locations. The corporate headquarters will be in Canada, but Burger King will still be operated out of Miami.