Nestle to pay $7.15 bln to Starbucks in coffee tie-up

Mae Love
May 7, 2018

Starbucks Corporation (NASDAQ:SBUX) will get $7.15 billion upfront in cash from Nestle S A/S ADR (OTCMKTS:NSRGY) for the rights to sell Starbucks coffee products in retail and food-service channels.

Packages of Starbucks coffee for sale are seen displayed at a Starbucks coffee shop in New York City, New York, US, May 4, 2018.

Nestle CEO Mark Schneider said it was "a great day for coffee lovers".

The news comes as investors were disappointed in the company's April 26 earnings report, which showed same-store sales up only 2%, but net revenues up 14% year over year, to $6 billion.

It doesn't affect any of the products sold in coffee shops, but means Nestlé will sell Starbucks-branded pods for their Nespresso machines, as well as coffee in bags. It's now adding Starbucks coffee and tea products to the list.

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The deal also gives Nestle the rights to sell branded packaged coffee products, including Seattle's Best Coffee, Starbucks VIA, Torrefazione Italia and the Teavana tea brand.

Bloomberg reported on the deal last week, citing an analyst who put the after-tax value for Starbucks at $3.8 billion.

Nestle, which will take on about 500 Starbucks employees as part of the deal, says its ongoing share buyback program would remain unchanged.

Starbucks President and CEO Kevin Johnson said, "This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestlé".

The deal still needs approval from regulators and is expected to be finalized in summer or early fall this year, the companies said.

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