Tim Hortons Article Critique

Article review

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Summary

This newspaper article appearing in the Canadian Press containing the report, “Painful Changes” Await Tim Hortons under New Owners warns of the cuts that will be experienced by the Canadian firm if the planned takeover by burger king proceeds. The article makes the general argument that the government should intervene by stopping the deal or by ensuring that the incoming owners, 3 G Capital makes strong commitments about job protections and investment. In the report from a left-leaning think tank, the news paper article claims that Burger King will seek maximum profits from Tim Horton’s which will in turn hurt Canadian interests. Despite responses from Tim Hortons that it has a different perspective of the deal. The left-leaning think tank points to Burger King’s track record of cost cutting and employee layoffs that will hurt Canadian interests.

The paper details how Burger King proceeded to win the approval from Industry Canada, the government department tasked with approving foreign takeovers (Sturgeon, 2015). Some of the commitments made by burger king include moving the company’s headquarters to Ontario and pumping in $140 million annually to enhance the operations Tim Hortons. These commitments led to the approval because the industry regulator must determine if the foreign takeover is of benefit to Canada. However, the report claims that the commitments fall short since the Brazil-based firms has an history of reducing staff levels and operating budgets, and stripping assets of its new acquisitions, which is opposite of what it pledges to do in Canada.

The newspaper gives example to support its claims. This include the takeover of H.J Heinz Co. in 2013 by the same firm that led to the closure of the company’s Leamington plant that was more than a century old. The plant was the largest employer in town and it led to loss of 740 jobs. By borrowing $12.5 billion to finance the deal and the need to make profits, the report argues that Burger King will be forced to cut expenses and layoff some employees in order to achieve them (Sturgeon, 2015). The cuts experienced at burger king’s headquarters since it was taken over by 3 G capital is additional evidence used by the report to show that Tim Hortons should brace for tougher times ahead.

Evaluation

The article makes strong points to support its general argument that the takeover of Tim Hortons by burger king does not favor Canadian interests. By financing the takeover using loans, 3 g Capital has a financial burden that it must lessen by cutting costs at Tim Hortons. The report is justified to make the conclusion that the drive for profits and the need to surface the loan will force 3 g capita to introduce cuts that will lead to loss of employment. By using the example of the cuts introduced at Burger King’s headquarters following takeover by 3 G Capital in 2010, the report makes a sound argument. Furthermore, the closure of ketchup maker H.J Heinz plant in Leamington following its acquisition by the 3 G Capital is additional evidence used by the report to back its claims.

Another good point of the article is the use of suggestions from industry experts and analysts. These suggestions are contrary to comments from 3 G executives. Although mergers and takeovers leads to synergies as the strengths of the two firms are combined, one way of realizing these synergies is by reducing or eliminating overlapping costs. Company executives usually use synergy as a veiled term to describe cuts. It is obvious that the cuts will favor the company, but it will also disadvantage employees who will face layoffs.

Responding to counterarguments is also another strong point of the article. The assertion that the takeover will not hurt Canadian interests since Tim Hortons locations are operated through a franchise system is not true because the franchise holder will aim at squeezing more revenue from the franchise (Sturgeon, 2015). The franchises will in turn layoff employees to meet increasing financial commitments owed to 3 G Capital. Lastly, the article makes a strong point of disputing claims that the takeover will help Tim Hortons to expand globally, which will create more profits and employment opportunities in Canada. This is not true since the business model adopted by the company at burger king outsources all functions to foreign companies that operate franchises in a particular country. Such as business model does favor the interests of the employees and the host country. Despite making strong argument against the planned takeover of Tim Hortons by burger king, the article’s notable weakness is failure to use sufficient data to back its claims. The examples of H.J Heinz Co. and Burger King’s headquarters are insufficient to force the industry regulator to stop the deal.

Reference

Sturgeon, J. (2014). ‘Painful changes’ await Tim Hortons under new owners: report. Global News, October 30, 2014. Retrieved from http://globalnews.ca/news/1644652/painful- changes-await-tim- hortons-under-new-owners-report/