In what could be termed as a historic deal, Swiss food giant Nestle announced that it will pay USD 7.15 billion in cash for the rights to market Starbucks products around the world, outside of the company’s coffee shops.
As part of this transaction, Starbucks will receive an up-front cash payment of USD 7.15 billion for a business which generated annual sales of USD 2 billion. The transaction does not include the transfer of any fixed assets, which facilitates a smooth and efficient integration.
The agreement gives Nestle, which owns the Nescafe and Nespresso brands, a strong platform for continued growth in North America, the company said in a statement.
“This transaction is a significant step for our coffee business, Nestlé’s largest high-growth category. 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 recognized as global leaders for their responsible and sustainable coffee sourcing,” said Mark Schneider, CEO, Nestlé. ”
The agreement gives Nestle, which owns the Nescafe and Nespresso brands, a strong platform for continued growth in North America
Nestlé expects this business to contribute positively to its earnings per share and organic growth targets as from 2019. Nestlé’s ongoing share-buyback program will remain unchanged.
The deal also allows Nestlé to capture exciting new growth opportunities in the rest of the world with Starbucks premium products. However, it excludes ready-to-drink products and all sales of any products within Starbucks coffee shops.
As a complete provider of coffee solutions, Nestlé will accelerate growth in out-of-home channels. According to the deal, the two companies will work closely together on innovation and go-to-market strategies to bring the best coffee to customers around the world.
“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, Starbucks.
The move has been taken to focus and evolve the business to meet the changing consumer needs, the company said in a statement.
Around 500 Starbucks employees will join the Nestlé family to drive performance of the existing business and global expansion. Operations will continue to be located in Seattle.
The transaction, which needs approval from regulators, should be finalized by the end of 2018, Nestle said, adding that the deal should start making a positive contribution to its earnings per share and its growth targets starting next year.