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Starbucks ( SBUX ) aims to finalise sale by year-end, sources say

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Primavera, Carlyle, Hillhouse, EQT, may bid, sources say

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China market share was 14% in 2024 versus 34% in 2019

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Cafe chain faces sluggish economy, rapid growth of local

rivals

By Kane Wu and Julie Zhu

HONG KONG, Aug 22 (Reuters) - Starbucks ( SBUX ) has

asked a short-listed group of potential bidders to submit

non-binding bids for a stake in its China business within the

next two weeks, two people with knowledge of the matter said.

The U.S. coffee shop chain invited interested parties

including private equity firms Carlyle, EQT,

Hillhouse Investment and Primavera Capital to attend management

presentations where it would disclose financial and operational

details of its China business, said one of the people as well as

a third person with knowledge of the presentations.

Other potential bidders include Bain Capital, KKR & Co ( KKR )

and technology major Tencent ( TCTZF ), said one of the

first two sources and two other people familiar with the matter.

A new partner in China could add impetus to a business whose

market share has more than halved in the past five years, as

low-price local rivals grow apace while consumers become

increasingly cost-conscious in a stuttering economy.

In May this year, Starbucks ( SBUX ) began the sale by inviting

interested parties to answer questions about their businesses by

late June, Reuters previously reported.

The Seattle-based company said at the time it was not

considering a full sale of the business - which bidders expect

will be valued at up to $10 billion, CNBC reported citing

sources.

In July, it selected up to 10 interested parties and signed

non-disclosure agreements ahead of granting potential access to

financial and operational figures, the five people said.

It has yet to finalise the structure of the sale or size of

the stake, said the people, who declined to be identified as the

information was not public.

The cafe chain has held informal talks with a range of

potential buyers since the second half of last year and aims to

reach a deal by year-end, sources previously told Reuters.

CEO Brian Niccol on Starbuck's quarterly earnings call last

month said the cafe chain had received interest from more than

20 parties and was evaluating options.

"We remain committed to our China business and want to

retain a meaningful stake... We will only enter a transaction if

it makes sense for Starbucks ( SBUX )," said Niccol, CEO since August

last year.

Starbucks ( SBUX ) on Friday declined to comment further.

Primavera, Carlyle, EQT, KKR and Bain declined to comment.

Hillhouse and Tencent ( TCTZF ) did not respond to requests for comment.

Starbucks ( SBUX ) is pursuing the sale after reporting strong

overall revenue for the three months through June 29 under a

turnaround plan Niccol implemented after several quarters of

falling earnings.

Net revenue rose 3.8% to $9.46 billion, slightly exceeding

the average analyst estimate, though same-store sales fell for a

sixth consecutive quarter, by 2%.

In China, Starbucks ( SBUX ) faces sluggish economic growth and

competition from local brands such as Luckin Coffee,

which has gained market share with cheaper products and greater

presence in smaller cities.

Starbucks' ( SBUX ) 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, showed data from market researcher

Euromonitor International.

The chain has since taken the rare step of reducing prices

for some non-coffee drinks in China and increased the pace of

new and China-centric product innovation.

Comparable-store sales in China increased 2% in the quarter

ended June 29 versus zero growth in the previous quarter.

Starbucks ( SBUX ) operated 7,828 stores in China as at June-end, its

latest quarterly report showed. It did not disclose core

earnings at its China business.