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By Julie Zhu and Kane Wu
HONG KONG (Reuters) -Most of the bidders seeking to buy a portion of Starbucks’ China operations have submitted offers valuing the business at as much as $5 billion, said two people who have knowledge of the deal discussions.
That quotation would make a potential deal one of the most valuable China unit divestments by a global consumer company in recent years.
The offers, which have not been reported previously, would let Starbucks push ahead with the sale in a market where it faces sluggish economic growth and stiff competition from local brands.
Starbucks invited around 10 potential buyers to submit non-binding bids by early September, Reuters reported last month.
Most of those bids set the value for Starbucks China at about 10 times its expected earnings before interest, taxes, depreciation, and amortisation (EBITDA) of $400 million to $500 million in 2025, said the people.
At least one bidder offered an EBITDA multiple in the high teens, said one of the people.
The multiple bidders offered for Starbucks China is similar to one of its main rivals Luckin Coffee, which is currently valued at nine times its projected EBITDA for the next 12 months.
Luckin has been gaining market share against Starbucks by offering lower-priced products and increasing its presence in smaller Chinese cities.
The people asked to remain unidentified as the information is confidential.
In response to Reuters request for comment, a spokesperson for Starbucks referred to the chain’s latest quarterly earnings which saw record-breaking sales growth in international business and the third consecutive quarterly revenue growth in China.
The spokesperson declined to comment on the valuation of the China business or the latest status of the bidding process.
Starbucks’ enterprise value for the global business is 20.6 times its trailing 12-month EBITDA, and is projected to be 19.3 times the forecast of EBITDA for the next 12 months, according to LSEG data.
The Seattle-headquartered company has a market value of about $99 billion as of Thursday.
INTERESTED PARTIES
Starbucks has not yet decided how large a stake it is selling in the China business, Reuters reported last month. The two sources said they did not have information on the stake size.
In May, the company said it was not considering a full sale of the business. Starbucks CEO Brian Niccol said on the quarterly earnings call in July it would maintain a meaningful stake in the China business.
Starbucks’ market share in the world’s second-largest economy – home to more than a fifth of its cafes – was 14% last year versus 34% in 2019, data from market researcher Euromonitor International showed.
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