Starbucks’ (SBUX) has attracted offers for a potential stake sale that values the retail coffee chain’s China operations at up to $10 billion U.S.
Almost 30 domestic and foreign private equity firms in China have submitted non-binding offers to take a stake in Starbuck’s coffee outlets across China.
Proposals reportedly value the Chinese retail network at $5 billion U.S. to $10 billion U.S., with bidding expected to settle toward the high end of that range.
As Starbucks’ market capitalization is at $108 billion U.S. with its China business generating 8% of global revenue, a fair valuation would stand at around $9 billion U.S.
Seattle-based Starbucks had 7,758 stores across China as of March. The company is reportedly in the process of evaluating the offers before shortlisting potential buyers.
It’s doubtful that any equity stake in the China business will be completed this year as Starbucks plans to keep a meaningful stake in the Chinese operations and may not sell any stake.
In one scenario, Starbucks might retain a 30% stake in the China business, with the rest split among a group of buyers each holding less than 30%. But no decisions have yet been made.
U.S. private equity firms Carlyle Group (CG) and KKR & Co. (KKR) are among the companies vying for a stake in Starbucks’ China business.
Starbucks is considering selling equity stakes in its China operations as the company struggles with soft global sales and a stock that has been at the same level for the past three years.
Wall Street investment bank Goldman Sachs (GS) is the financial adviser on the potential sale of an equity stake in the China business.
SBUX stock is up 3% this year and trading at $94.94 U.S. per share.
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