SEATTLE (dpa-AFX) - Coffee retailer Starbucks Corp (SBUX) said Tuesday it will buy the remaining 60.5% share of Starbucks Coffee Japan Ltd (Starbucks Japan) that it currently does not own for about $913.5 million. The deal is to be effected through a two-step tender offer process involving Starbucks' joint venture partner in Japan and shareholders.
The deal, Starbucks said, is part of efforts to further elevate growth and innovation in Japan, its second-largest market when measured by retail store sales.
Starbucks Japan is a joint venture between Starbucks and Sazaby League that operates Starbucks branded retail stores in Japan.
The first step in the two-step tender offer process begins with Sazaby tendering its shares, which will commence on September 26th. The purchase price for Sazaby's 39.5% stake is ¥965 per share, for a total of ¥55 billion, or about $505 million.
Upon final settlement of this first tender offer step, which is anticipated to occur during the middle of Starbucks first quarter of fiscal 2015, Starbucks will own a controlling 79% interest in Starbucks Japan.
Shortly after the settlement of the first step in the tender offer, Starbucks will initiate the second step for the remaining 21% ownership interest held by public shareholders and option holders of Starbucks Japan's common stock. The tender offer purchase price for this second step is ¥1,465 per share, for a total of ¥44.5 billion, or about $408.5 million.
The public price per share of ¥1,465 represents an 11.6% premium to the 30-day average price of Starbucks Japan's stock, a 4.7% premium to the closing price on Monday, September 22, and a 51.8% premium to the price Starbucks is paying Sazaby for its shares.
All steps of this tender offer process have been unanimously approved by the boards of directors of Starbucks, Sazaby and Starbucks Japan, and the transactions are expected to be fully completed during the first half of calendar 2015.
The deal positions Starbucks to accelerate growth across multiple channels in Japan, including the potential introduction of new concepts, such as Teavana.
Before the end of the first quarter of fiscal year 2015, Starbucks expects to have a controlling interest and will consolidate Starbucks Japan into the company's results.
Starbucks expects this transaction will be immediately accretive on a non-GAAP basis.
Since the inception of their joint venture agreement in 1995, Starbucks and Sazaby together introduced the coffeehouse experience to Japanese customers. Starbucks said the deal would enable it to build on more than 1,000 existing stores and nearly 20 years of brand loyalty.
The deal comes as Sazaby approached Starbucks about selling its Starbucks Japan ownership stake and exiting the business in advance of the expiration of Starbucks Japan's retail franchise rights.
The consolidation of Starbucks Japan's financial results into Starbucks financials will commence after the final settlement of the first step of the tender offer.
Starbucks said the financial targets for its fourth quarter and fiscal year 2014 provided in July are unchanged as a result of this transaction.
Starbucks stock closed Tuesday at $73.96, down $0.64 or 0.86%, on a volume of 3.5 million shares on the Nasdaq. In after hours, the stock dropped $0.01 or 0.01%.
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