Nestlé enters $7 billion agreement with Starbucks

NEW DEAL: Starbucks will keep its Seattle headquarters

Nestlé has announced an agreement granting it perpetual rights to market Starbucks consumer and foodservice products globally, beyond its coffee shops.

As part of this transaction, Starbucks will receive an up-front cash payment of US$7.15 billion for a business that generates annual sales of around $2 billion.

The transaction does not include the transfer of any fixed assets. Nestlé expects this business to contribute positively to its earnings per share and organic growth targets as from 2019. Nestlé’s ongoing share-buyback programme will remain unchanged.

“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,” said Kevin Johnson, President and CEO of Starbucks.

“This historic deal is part of our ongoing efforts to focus and evolve our business to meet the changing consumer needs, and we are proud to work alongside a company that is committed to our shared values.”

“This transaction is a significant step for our coffee business, Nestlé’s largest high-growth category,” said Mark Schneider, CEO, Nestlé. “With Starbucks, Nescafé and Nespresso we bring together three iconic brands in the world of coffee. We are delighted to have Starbucks as our partner. Both companies have true passion for outstanding coffee and are proud to be recognised as global leaders for their responsible and sustainable coffee sourcing. This is a great day for coffee lovers around the world.”

Approximately 500 Starbucks employees will join Nestlé to drive performance of the existing business and global expansion. Operations will continue to be located in Seattle.

The agreement is subject to customary regulatory approval and is expected to close by the end of 2018. The agreement excludes Ready-to-Drink products and all sales of any products within Starbucks coffee shops.

Earlier this year, Nestlé pulled out of the North American confectionery market after selling its confectionery interest to Ferrero for $2.8 billion.