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Private equity groups Carlyle and Boyu Capital are the leading contenders to acquire a majority stake in Starbucks’ China business, as the US coffee chain seeks a local partner to help steer it through an increasingly competitive market.
Three people close to the deal process said the two groups were currently seen as Starbucks’ preferred partners, with a valuation for the full China business likely to come in at about $4bn, excluding royalties, which are still being negotiated.
Five private equity groups submitted binding offers last week, the people said. Starbucks executives are expected to make a decision by the end of the month, though the timeline is not final, they added.
Starbucks confirmed it was evaluating offers from five bidders.
Mainland China was once a major profit driver for the Seattle-based group, but it has struggled in recent years against more price-competitive homegrown challengers such as Luckin Coffee. The surge in competition forced Starbucks in a rare move to cut prices on some of its drinks this summer.
The total value of the deal to Starbucks, including the partners’ investment, its retained stake in the China business and royalties that will flow to the US company in the coming years, is expected to top $10bn, according to Starbucks.
The business has attracted “strong interest from multiple, high-quality partners all of whom share our confidence in the long-term growth potential of Starbucks in China”, said a spokesperson.
Private equity groups also in the running include Neil Shen’s HongShan Capital Group (HSG), Primavera Capital and FountainVest, said the people close to the deal. Bidders could ultimately end up in a consortium with Starbucks retaining up to a 49 per cent stake.
Starbucks chief executive Brian Niccol told analysts in July that the company would only pursue a transaction that aligned with Starbucks’ “mission and values” and that it was looking for a partner to help it operate more effectively in China.
“It’s not about capital,” said Niccol, who was chief executive of Taco Bell when US parent Yum Brands spun off its China business in 2016. “This is about how do we ensure that the Starbucks’ brand is in a much better place in the future, because I do believe there’s going to be thousands of more Starbucks in China.”
The people close to the deal said Starbucks was closely assessing bidders’ ability to transform its supply chain in the country and maintain relations with local partners, giving Chinese private equity groups an edge.
One of the people noted that Carlyle’s role in a 2017 majority buyout of McDonald’s China could work in its favour.
The sale comes as Starbucks’ China business shows signs of stabilising after country revenue fell in the year to September 2024 on the back of declining same-store sales. Niccol in July said the unit had achieved three consecutive quarters of revenue growth.
Starbucks, which operated 7,828 mainland stores as of the end of June, was overtaken by Luckin in total China store count about five years ago. The $12bn Chinese coffee chain now has about 26,000 mainland stores and a growing international presence.
It recently pushed into Starbucks’ home turf, opening its first US stores in New York.
HSG declined to comment. Boyu, Carlyle, FountainVest and Primavera did not respond to requests for comment.
Additional reporting by Arjun Alim in Hong Kong and Gregory Meyer in New York
