The deal between the two companies will have Nestle handling the the Starbucks brand when it comes to consumer packaged goods and foodservices. This will have it taking care of selling the chain’s at-home and on-the-go coffee products.
Nestle notes that this deal means it will be able to sell consumer packaged versions of Starbucks, Seattle’s Best Coffee, Starbucks Reserve, Teavana, Starbucks VIA and Torrefazione Italia products. It will also add the brand to its own Nestle single-serve capsule product.
According to Starbucks, Nestle is paying $7.15 billion in closing consideration for the right to sell the goods with its name on it. SBUX notes that it will continue to remain invested in the process with Nestle by remaining the licensor and supplier for the consumer packaged goods.
Starbucks also notes that it already has plans for the after-tax proceeds that it will get from the $7.15 billion deal. This includes speeding up its share buyback plan. It now plans to buy back $20 billion worth of SBUX shares through 2020. The coffee company is also expecting the offer to accretive to its earnings per share by the end of its fiscal year for 2021.
Starbucks and Nestle are still waiting for customary closing conditions and regulatory approval before completing the deal. However, they are expecting it to close by Fall of this year.
SBUX stock was largely unaffected by the news, but NSRGY stock was up 1% as of noon Monday.
As of this writing, William White did not hold a position in any of the aforementioned securities.