In an effort to reduce taxes, Burger King Worldwide Inc (NYSE:BKW) has acquired Tim Hortons Inc (TSE:THI) (NYSE:THI) for $11.4 Billion.

Burger King stock price rose from $26.95 to a peak of $33.85 on announcement of the inversion possibility, while Tim Hortons rose from $62.73 to a peak of $77.30 on announcement of the possibility.  Tim Hortons Inc. continued to rise to $81.32 after the announcement that the deal went through while Burger Kings dropped back down to the $30′s.

Tim Hortons is a coffee and doughnut chain located in Canada. Burger King’s purchase of Tim Hortons is structured as a tax inversion deal, and would relocate the hamburger chain’s headquarters to Canada.

In a statement released today, the two parties are currently discussing the terms of the deal, which would essentially create a new company. This merger would in effect create the third largest fast food service restaurant in the world.

Inversion deals have been rising in popularity lately, but are also facing increasingly stiff opposition by the government on the base that they pose a danger to drain the United States government financial reserves. If Burger King’s deal with Tim Hortons goes through, the United States government is sure to step up its criticism and regulatory actions in response.

According to a person familiar with the matter, an agreement between the two companies could be reached soon.

Burger King has a market value of $9.6 billion and Tim Horton is valued at $8.4 billion. As a duo, the two companies are currently worth about $18 billion.

With the acquisition of Tim Hortons and the relocation to Canada, Burger King would shift itself into a lower tax bracket. This move allows companies to cut expenses on foreign earnings and cash kept overseas, as well as decrease their overall corporate rate. While many of the recent big inversion deals have involved European companies, Canada is now in the spotlight as well. This is mostly due to the closeness of the location and similarity between the United States and Canada’s federal corporate tax rate when it dropped to 15 percent in 2012.

An example of a deal signed on the basis of tax inversion is the combination of Valeant Pharmaceuticals International Inc (NYSE:VRX) (TSE:VRX), which was originally based in California, and BioVail Corp, which is based in Canada. The deal was signed in 2010 and relocated Valeant to Canada. The company now only pays a tax rate of 5 percent.

After a multitude of tax inversion deals, the United States government placed the responsibility on Congress to take action to prevent companies from pursuing any more inversions. The United States Treasury Department recently announced that it is compiling a list of options to prevent or deter the deals for Secretary Jacob Lew to look over and consider.

Despite that, Burger King doesn’t have a plan to write in a line in the deal in the merger agreement that would allow it to abandon the deal if regulations come into effect that reduce the benefits of tax inversion.

In most of the recent tax inversion deals, the engaged businesses are mostly in the health care industry. A tax inversion deal by the burger giant would signify that deals have appeal beyond the health space, since companies from multiple industries are looking for ways to become more competitive and cut costs on the tax side.

Burger King opened up its first store in Miami in 1954, where its headquarters are located now. Since then, the business has grown to be the world’s second largest hamburger chain. Burger King operates more than 13,000 locations in just under 100 countries, and service more than 11 million customers on a daily basis.

Tim Hortons is based in Oakville, Ontario, and is known in the country for its coffee. The company operates on a high margin business line, a point that most fast food giants in the United States have struggled to achieve. Burger King has been creating and adding more coffee products and flavors to its menu to compete against its rival McDonals Corp (NYSE:MCD), which has seen success with its McCafe specialty coffee line. Burger King recently partnered with Seattle’s Best Coffee, a brand under Starbucks Corp, to help its coffee business gain its foothold in the market.

Wendy’s Co (NYSE:WEN) bought Tim Hortons in 1995. At that time, executives in the fast food industry were looking for ways to expand their companies beyond the burger market.

Pershing Square Capital, an activist hedge fund led by William Ackman, and Trian Fund Management later gained shares in Wendy’s and pushed the company to let off the Canadian coffee chain. Wendy’s did so in 2006.

In 2013, Scout Capital Management LLC and Highfields Capital Management, both hedge funds, revealed that they had stakes in Tim Hortons, and pushed for the company to stop its expansion into the United States and improve its financial situation by buying back more shares.

3G Capital Management, a Brazilian private equity firm, bought Burger King and made the chain a private company in 2010. A few years after, the firm signed a deal that made use of an investment vehicle that is co-owned by Ackman to make Burger King a publicly traded company again. 3G Capital Management still keeps control of the company.

3G Capital Management has office locations in Rio de Janiro in Brazil, as well as New York, has become a major mover in the United States food sector. The private equity firm invests in iconic, household name brands. The co-founder of 3G, Jorge Paulo Lemann, held a large stake in InBev, and helped the company acquire Anheuser Busch in 2008. Last year, 3G partnered with Warren Buffett to purchase H.J. Heinz Co, a ketchup maker based in the United States, for $23 billion, marking one of the biggest deals of 213.

A key reason for the Burger King and Tim Hortons deal is the possibility to increase Burger King’s experience in worldwide development to increase Tim Horton’s international growth. This may occur if the two companies decide to operate a separate stand-alone brands.

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