8-KMaterial AgreementsOther EventsExhibits & Filings

STARBUCKS CORP 8-K Report, Material Agreement (May 7, 2018)

Filed May 7, 2018For Securities:SBUX

Summary

Starbucks Corporation announced a significant strategic transaction with Nestlé S.A. on May 6, 2018, entering into a Transaction Agreement (TA). This agreement involves the sale of Starbucks' global consumer packaged goods (CPG) and foodservice business to Nestlé for $7.15 billion in cash. The deal encompasses the transfer of assets used in marketing, selling, and distributing Starbucks, Teavana, and other branded products across these channels, along with associated liabilities. In return, Starbucks will receive a base purchase price for the assets and a substantial payment for entering into a Master Supply, Distribution, and Licensing Agreement (MSDLA) and related agreements. This transaction represents a strategic shift for Starbucks, allowing it to focus on its core coffeehouse experience while leveraging Nestlé's global CPG and foodservice expertise for its packaged goods. The agreement includes a long-term supply and distribution framework, with Nestlé becoming the exclusive distributor for Starbucks products in these channels, subject to certain exceptions. The deal is subject to customary closing conditions, including antitrust approvals, and is expected to close by November 6, 2018, with an extension option. This move is poised to provide significant capital for Starbucks and streamline its business operations.

Key Highlights

  • 1Starbucks enters into a material definitive agreement with Nestlé S.A. for the sale of its global consumer packaged goods (CPG) and foodservice business.
  • 2The transaction value is $7.15 billion in cash, comprising a base purchase price for assets and a significant payment for supply, distribution, and licensing rights.
  • 3Nestlé will acquire all assets exclusively used in Starbucks' CPG and foodservice business, including brands like Starbucks, Teavana, and Seattle's Best Coffee.
  • 4A Master Supply, Distribution, and Licensing Agreement (MSDLA) will be entered, making Nestlé the exclusive distributor for Starbucks' CPG and foodservice products globally (subject to exceptions).
  • 5The agreement includes initial supply and distribution agreements for the US and Canada, alongside trademark licenses.
  • 6Closing is subject to regulatory approvals, including HSR Act clearance, and customary conditions, with an expected closing date of November 6, 2018.
  • 7The transaction allows Starbucks to focus on its core coffeehouse business and reinvest capital generated from the sale.

Frequently Asked Questions

The primary purpose is for Starbucks to sell its global consumer packaged goods (CPG) and foodservice business to Nestlé for $7.15 billion. This allows Starbucks to concentrate on its core coffeehouse experience while partnering with Nestlé to manage and grow the CPG and foodservice channels through a long-term supply, distribution, and licensing arrangement.

Starbucks will receive $7.15 billion in cash. This amount consists of a base purchase price of $330 million for the transferred assets (adjusted for inventory) and $6.82 billion for the entry into the Master Supply, Distribution, and Licensing Agreement (MSDLA) and related rights.

The sale includes all assets exclusively used in the marketing, selling, and distributing of Starbucks, Starbucks Reserve, Teavana, Seattle's Best Coffee, Starbucks VIA, and Torrefazione Italia branded products to consumer packaged goods and foodservice businesses.

The closing of the transaction is contingent upon several conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act, receipt of other governmental approvals, absence of any governmental restraints, and completion of customary closing conditions such as accurate representations and warranties and due performance of covenants.