Starbucks to sell control of China business to Boyu Capital in US$4 billion deal

Starbucks said on Monday (Nov 3) it would sell control of its China operations to investment firm Boyu Capital in a deal valued at US$4 billion, in one of the most valuable divestments of a China unit by a global consumer company in recent years.

Under the agreement, the companies will operate a joint venture, with Boyu holding an interest of up to 60 per cent in Starbucks’ retail operations in China. 

Starbucks will retain a 40 per cent interest in the joint venture and will continue to own and license the brand and intellectual property to the new entity, the companies said.

Starbucks said it expects that proceeds from the sale, combined with Starbucks’ retained stake and licensing over the next ten years, will total more than US$13 billion.

Shares of Starbucks were up about 3 per cent in after-hours trading.

Final bidders, which included Carlyle Group, valued Starbucks China at about 10 times over its core earnings in their offers, sources had said.

Starbucks’ market share in China has declined in recent years due to fierce competition from local coffee chains that offer cheaper products amid an economic slowdown that has changed consumer habits.

Its market share in China – home to more than a fifth of its cafes – fell sharply to 14 per cent last year from 34 per cent in 2019, according to Euromonitor International data.

To counter these challenges, the chain has implemented measures such as reduced prices for select non-coffee beverages and an accelerated introduction of new localised products.