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Starbucks Sells Distribution Rights to Nestle for $7.15 Bln; Plans to Return $20 Bln Cash to Shareholders

5:36 AM, May 7, 2018 — Starbucks (SBUX), the global roaster and retailer of specialty coffee, disclosed early Monday an earnings accretive deal under which Switzerland’s Nestle will pay the company $7.15 billion for the rights to market, sell, and distribute the Starbucks product range across its international channels.

As part of the move, which will help expand Nestle’s “at-home and away-from-home coffee” categories globally, Starbucks will retain a “significant stake” as a licensor of the global coffee alliance and supplier of roast and ground products, according to a statement.

Starbucks said it intended to use the after-tax proceeds primarily to accelerate share buybacks. It now expects to return about $20 billion in cash via share repurchases and dividends through fiscal year 2020.

Additionally, the transaction is expected to be earnings-per-share accretive by fiscal year 2021 at the latest, with no change expected to Starbucks’ current long-term financial targets, the statement noted.

The statement further added that the global alliance aims to leverage the strength of the Starbucks brand with Nestle’s global reach, creating new growth opportunities in the established North American markets and unlocking expansion in international markets.

The deal “is part of our ongoing efforts to evolve our business to meet changing consumer needs,” said Kevin Johnson, the chief executive officer of Starbucks.

Companies: Starbucks Corporation
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