8-KAcquisitions & DispositionsRegulation FDOther Events+1

STARBUCKS CORP 8-K Report, Acquisition Completed (Aug 28, 2018)

Filed August 28, 2018For Securities:SBUX

Summary

Starbucks Corporation (SBUX) announced the completion of its asset sale to Nestlé S.A. on August 26, 2018. This transaction involved the sale of Starbucks' consumer packaged goods (CPG) and foodservice business, encompassing brands like Starbucks, Teavana, and Seattle's Best Coffee, to Nestlé for $7.15 billion in cash. This strategic move allows Starbucks to streamline its operations and focus on its core retail business, while Nestlé gains significant expansion in the global CPG and foodservice channels for Starbucks products. The company anticipates that the earlier-than-expected closing of this deal will slightly reduce its fiscal year 2018 GAAP and non-GAAP Earnings Per Share (EPS) guidance by $0.02 to $0.03. Starbucks also plans to utilize approximately $5 billion of the after-tax proceeds from this sale to repurchase its common stock in fiscal year 2019. The company has entered into a Master Supply, Distribution and Licensing Agreement (MSDLA) with Nestlé, establishing a framework for ongoing distribution and supply, ensuring product quality and brand integrity.

Key Highlights

  • 1Starbucks completed the sale of its consumer packaged goods and foodservice business to Nestlé for $7.15 billion in cash on August 26, 2018.
  • 2The transaction includes the sale of assets related to Starbucks, Teavana, Seattle's Best Coffee, Starbucks VIA, and Torrefazione Italia branded products in CPG and foodservice channels.
  • 3Starbucks expects the early closing of this deal to reduce its FY2018 GAAP and non-GAAP EPS guidance by $0.02 to $0.03.
  • 4The company intends to use approximately $5 billion of the after-tax proceeds from the sale for share repurchases in fiscal year 2019.
  • 5A Master Supply, Distribution and Licensing Agreement (MSDLA) was entered into with Nestlé to govern the ongoing supply and distribution relationship.
  • 6Starbucks will retain control over sourcing green coffee beans, while Nestlé will handle distribution and marketing for the licensed channels.
  • 7The agreement includes provisions for ongoing revenue streams for Starbucks through product sales and royalty payments from Nestlé.

Frequently Asked Questions

The primary purpose was for Starbucks to sell its consumer packaged goods (CPG) and foodservice business to Nestlé. This strategic divestiture allows Starbucks to focus more intensely on its core global store operations and coffeehouse experience, while Nestlé expands its global reach in the CPG and foodservice sectors for Starbucks-branded products.

Starbucks received $7.15 billion in cash from Nestlé upon the closing of the transaction.

Starbucks plans to use approximately $5 billion of the after-tax proceeds from this sale to repurchase its common stock in fiscal year 2019. The remaining proceeds will likely be used for general corporate purposes, strategic investments, or debt reduction.

The earlier-than-planned closing of the transaction is expected to negatively impact both Starbucks' fiscal year 2018 GAAP and non-GAAP Earnings Per Share (EPS) guidance by $0.02 to $0.03 per share.

Starbucks and Nestlé have entered into a Master Supply, Distribution and Licensing Agreement (MSDLA). Under this agreement, Nestlé will act as the primary distributor and marketer for Starbucks products in the consumer packaged goods and foodservice channels globally. Starbucks will supply certain products and license its brands to Nestlé, continuing to receive revenue through sales and royalty payments.