Company to purchase remaining 60.5% share of
Starbucks Japan in two-step tender offer process
Acquisition enables continued elevation of
unique Starbucks Experience for customers and partners through
coffee, store design and digital and mobile leadership
Starbucks to build on more than 1,000 existing
stores and nearly 20 years of brand loyalty and trust
Starbucks Corporation (Nasdaq:SBUX) today announced that it will
acquire the remaining 60.5% share of Starbucks Coffee Japan, Ltd.
(Starbucks Japan) that the company currently does not own through a
two-step tender offer process, further elevating Starbucks growth
and innovation in its second-largest market when measured by retail
store sales. The acquisition 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 when excluding certain
items noted later in this release.
Starbucks Japan is a joint venture between Starbucks and Sazaby
League that operates Starbucks branded retail stores in Japan.
Since the inception of their joint venture agreement in 1995,
Starbucks and Sazaby together introduced the coffeehouse experience
to Japanese customers and built one of Starbucks top-performing
markets globally. Starbucks Japan’s business today is marked by
strong brand recognition and deep customer loyalty built through
delivering an unparalleled Starbucks Experience. Starbucks stores
have been remarkably consistent performers despite ongoing
macro-economic challenges in Japan.
“Nearly 20 years ago we opened the first Starbucks store outside
of North America in Tokyo’s Ginza district with lines around the
block,” said Howard Schultz, chairman, president and ceo of
Starbucks Coffee Company. “Japan is a market we know well and care
deeply about, with more than 25,000 partners serving millions of
customers every week at more than 1,000 stores. Full ownership of
Starbucks Japan enables us to build on the amazing foundation of
customer trust and loyalty our partners have achieved by continuing
to take care of our people, delivering the highest quality coffee
and innovating in product, store design and the digital
experience.”
“We would like to thank all of our partners in Japan who wear
the green apron with pride and deliver the Starbucks Experience to
our customers each and every day,” commented John Culver, group
president China/ Asia Pacific, Channel Development and Emerging
Brands. “Their efforts have built an admired brand and delivered
the strong financial results that have made Starbucks Japan a
meaningful contributor to the growth and profitability in our
China/ Asia Pacific segment. We wish Sazaby the best and sincerely
appreciate the operational excellence and leadership that they have
contributed to Starbucks Japan’s success and the solid foundation
they have helped us build for the opportunities ahead.”
Over the summer, Sazaby approached Starbucks about selling its
Starbucks Japan ownership stake to Starbucks and exiting the
business in a smooth and orderly manner in advance of the
expiration of Starbucks Japan’s retail franchise rights. Starbucks
credits Sazaby with establishing and growing Starbucks Japan’s
healthy business and is excited for this next chapter in Starbucks
Japan’s evolution which will leverage existing infrastructure,
systems and expertise to continue disciplined retail growth and
expanded presence in other channels.
“It has been an honor for Sazaby to be part of the Starbucks
family for nearly two decades,” said Masatoku Mori, President and
Representative Director, Sazaby. “We are deeply grateful for the
opportunity we have had to introduce the Starbucks Experience and
the world’s best coffee to Japan. We have full confidence that
Starbucks will continue to care for our dedicated partners, loyal
customers and neighboring communities with the same personalized
attention and respect they’ve provided since opening our first
Starbucks store in 1996.”
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 approximately $505.0 million with
Japanese Yen converted into US Dollars at a reference conversion
rate of 108.93 JPY to USD. 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 and following the release of Starbucks Japan’s second quarter
earnings results, 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 approximately $408.5 million at the
above referenced conversion rate. 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 consolidation of Starbucks Japan’s financial results into
Starbucks financials will commence after the final settlement of
the first step of the tender offer, at which time Starbucks will
record the required purchase accounting adjustments, such as the
step-up in fair value of Starbucks existing ownership interest in
Starbucks Japan, as well as newly acquired tangible and intangible
assets. This information will be included in Starbucks first
quarter of fiscal 2015 externally reported financial results.
Financial targets for Starbucks fourth quarter and fiscal year
2014 provided in conjunction with Starbucks 2014 third quarter
earnings on July 24th are unchanged as a result of this
transaction. Starbucks expects this transaction to be slightly
accretive to the company’s fiscal year 2015 non-GAAP financial
results, when excluding: 1) an anticipated acquisition-related gain
in the first quarter of fiscal 2015 resulting from a fair value
adjustment of Starbucks current 39.5% ownership interest in
Starbucks Japan; 2) ongoing amortization expense of significant
acquired intangible assets related to the transaction; and 3)
transaction and integration costs.
The English translation of the press release issued by Solar
Japan Holdings G.K., an indirect wholly-owned subsidiary of
Starbucks that will acquire the shares and options, will be
available later today on Starbucks website at
http://investor.starbucks.com. The English translation of the
tender offer explanatory statement will be available on September
26, 2014 at http://investor.starbucks.com. The offering documents
will be available in Japanese on September 26, 2014 at
http://www.smbcnikko.co.jp/stock/tob.
Webcast Information
Howard Schultz, Starbucks chairman, president and ceo, and Troy
Alstead, chief operating officer, will host a webcast today at 3 pm
PDT to discuss this acquisition. The webcast may be accessed on the
Investor Relations page of Starbucks website at
http://investor.starbucks.com, where it will also be archived until
October 21, 2014.
About Starbucks
Since 1971, Starbucks has been committed to ethically sourcing
and roasting high-quality arabica coffee. Today, with stores around
the globe, the company is the premier roaster and retailer of
specialty coffee in the world. Through our unwavering commitment to
excellence and our guiding principles, we bring the unique
Starbucks Experience to life for every customer through every cup.
To share in the experience, please visit us in our stores or online
at www.starbucks.com.
About Starbucks Japan
Starbucks Japan was formed as a joint venture partnership in
1995 with license agreements that grant it the exclusive right to
develop and operate Starbucks coffee stores in Japan, and to use
certain trademarks, designs, marks, technologies, and know how.
With more than 1,000 stores today, Starbucks Japan employs
approximately 25,000 partners. Earlier this year, Sazaby approached
Starbucks about their interest in selling their Starbucks Japan
ownership stake and exiting the business. As stated in Starbucks
Japan’s securities filings, the existing license agreements are set
to expire on March 31, 2021 and contain no provision for
auto-renewal.
Important Notice
This press release is not, and does not constitute any part of,
an offer to sell or purchase, or a solicitation of an offer to sell
or purchase, any securities.
The tender offers will be conducted in accordance with the
procedures and information disclosure standards prescribed by
Japanese law, which may differ from the procedures and information
disclosure standards in the United States. In particular, Section
13(e) and Section 14(d) of the U.S. Securities Exchange Act of 1934
and the rules prescribed thereunder do not apply to the tender
offers, and the tender offers do not conform to those procedures
and standards.
Forward-Looking Statements
Certain statements contained herein are “forward-looking
statements” within the meaning of the applicable securities laws
and regulations. Generally, these statements can be identified by
the use of words such as “anticipate,” “expect,” “believe,”
“could,” “estimate,” “feel,” “forecast,” “intend,” “may,” “plan,”
“potential,” “project,” “should,” “will,” “would,” and similar
expressions intended to identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. These statements are based on information
available to Starbucks as of the date hereof, and Starbucks actual
results or performance could differ materially from those stated or
implied, due to risks and uncertainties associated with its
business. These risks and uncertainties include, but are not
limited to, the failure of the parties to consummate the two-step
tender offer due to commercial, regulatory or other reasons, as
well as general economic and industry factors such as coffee, dairy
and other raw material pricing and availability, successful
execution of internal performance and expansion plans, fluctuations
in U.S., Japanese and other international economies and currencies,
the impact of initiatives by competitors, the effect of legal
proceedings, and other risks detailed in the Company’s filings with
the Securities and Exchange Commission, including the “Risk
Factors” section of Starbucks Annual Report on Form 10-K for the
fiscal year ended September 29, 2013. The Company assumes no
obligation to update these forward-looking statements.
(C) 2014 Starbucks Coffee Company. All rights reserved.
Starbucks CorporationInvestor Relations:JoAnn DeGrande,
206-318-7118investorrelations@starbucks.comorMedia:Marianne
Duong, 206-318-7100press@starbucks.com
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