Starbucks China's acquisition bid reaches USD 5 billion, with Tencent, KKR, and others participating in the competition

According to Zhitong Finance APP, two people familiar with the transaction negotiations revealed that most of the bidders interested in acquiring Starbucks (SBUX.US) China operations have submitted offers, amounting to as much as $5 billion. This scale of bidding would make this potential transaction one of the highest valued cases of divestiture of global consumer goods companies in China in recent years. Previously, these bids had not been reported by the media, but they will assist Starbucks in continuing its sale plan in a market environment characterized by slowing economic growth and intense competition from local brands.

Last month, reports indicated that Starbucks had invited about 10 potential buyers to submit non-binding bids in early September. Insiders stated that most bids value Starbucks China at around 10 times its expected EBITDA of $400 million to $500 million for 2025. One insider mentioned that at least one bidder offered an EBITDA multiple as high as approximately 15%.

The situation of multiple bidders for Starbucks China is similar to its main competitor, Luckin Coffee, which is currently valued at nine times its expected EBITDA for the next 12 months. Luckin Coffee has captured a certain market share from Starbucks by offering low-priced products and expanding its influence in smaller cities in China. Due to confidentiality, these individuals requested anonymity.

In response to a request for comment, a Starbucks spokesperson referred to the chain's latest quarterly earnings, noting that its international business sales reached a record high, and revenue from its China operations grew for the third consecutive quarter. However, the spokesperson declined to comment on the latest status of the valuation and bidding process for its China operations.

According to data from the London Stock Exchange, the enterprise value of Starbucks' global business is 20.6 times its EBITDA for the past 12 months and 19.3 times the projected EBITDA for the next 12 months. As of Thursday, the Seattle-based company's market capitalization was approximately $99 billion.

Regarding stakeholder interests, reports last month indicated that Starbucks has not yet decided on the specific percentage of its China business to sell, and two sources also stated they were unclear about the specific scale. In May of this year, Starbucks stated that it was not considering a full sale of its China business. During the July quarterly earnings call, Starbucks CEO Brian Niccol mentioned that the company would retain a significant portion of its stake in the China business.

Market research firm Euromonitor International data shows that Starbucks' market share in China (where more than one-fifth of its global coffee shops are located) was 14% last year, down from 34% in 2019. Since then, Starbucks has taken the rare step of lowering prices on some non-coffee beverages in China and accelerating the launch of new products centered on China. For the quarter ending June 29, same-store sales in China grew by 2%, compared to zero growth in the previous quarter.

Last month's reports mentioned that the coffee chain invited private equity firms such as Carlyle, EQT, Hillhouse Capital, and Primavera Capital to submit preliminary bids. Other potential buyers include Bain Capital, KKR & Co, and tech giant Tencent. It is still unclear whether all these buyers submitted non-binding offers. Bain, EQT, Tencent, Carlyle, and Primavera Capital declined to comment, while other companies have not yet responded to requests for comment Currently, the next step in the sale process is not clear. Typically, when a binding offer is anticipated, the seller will select a small number of bidders from the initial round to enter the final round of bidding