Starbucks Corporation (SBUX), on Tuesday, announced plans to take full ownership of its Japanese joint venture (JV) — Starbucks Coffee Japan, Ltd. — in a deal valued at around $914 million.
Starbucks Japan is jointly owned by Starbucks and partner Sazaby League and includes more than 1,000 Starbucks branded stores in Japan.
The U.S. coffee chain will purchase the remaining 60.5% share of Starbucks Japan in two stages. In the first stage, Starbucks will purchase a controlling interest from Sazaby for about $505 million before the end of the first quarter of fiscal 2015 which runs through December. On completion of the purchase, Starbucks will own a controlling 79% interest in the JV. In the second stage, the remaining 21% equity stake owned by public shareholders will be purchased by the coffee company for about $408.5 million before the end of first half of calendar 2015.
The coffee giant’s Japan business has done consistently well despite the ongoing broader economic challenges in the country. Profits in the Japanese stores are reportedly among the highest among Starbucks’ markets.
Starbucks stated that Sazaby, which has been operating Starbucks Japan since 1995, had expressed its interest in selling the stake in the JV earlier this year.
Under the present licensing agreement, Starbucks Japan has the exclusive right to develop and operate Starbucks coffee stores in Japan. The acquisition of the Japanese JV will give Starbucks full control over its Japanese stores thereby enabling it to accelerate growth and innovation in its second-largest market. Starbucks plans to introduce new concepts like Teavana tea at its Japanese stores.
The move is in keeping with Starbucks’ increased focus on expanding outside the U.S. The company is increasingly investing in the Asian markets. The relatively low per-capita consumption as well as a burgeoning middle class with rising income levels increase the demand for convenience food and beverages and promise significant growth potential.
Starbucks’ China/Asia-Pacific region has delivered 15 consecutive quarters of revenue growth in excess of 20%. Management believes that China and the Asia-Pacific region will drive much more meaningful business growth over the next five years supported by rapid unit growth, growing brand awareness and increased usage of the mobile/loyalty platforms.
Other Stocks to Consider
Starbucks carries a Zacks Rank #3 (Hold). Better-ranked restaurateurs include Jamba, Inc.(JMBA), Chipotle Mexican Grill, Inc. (CMG)and Jack in the Box Inc. (JACK). While Jamba sports a Zacks Rank #1 (Strong Buy), Chipotle and Jack in the Box have a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment