Starbucks Sells Majority China Stake to Boyu Capital

Starbucks will sell a majority stake in its China business to Chinese private equity firm Boyu Capital, concluding a lengthy search for a local partner in an increasingly tough market, Kenji Kawase reported for Nikkei News.

Boyu will own 60% of the venture, with Starbucks holding the rest and continuing to own and license the brand and its intellectual property. (Photo: Swire Properties)

The Seattle-based coffee chain announced on Monday in the U.S. that it has agreed to form a joint venture with Boyu to run Starbucks’ retail operations in China.

According to the statement, Boyu will own 60% of the venture, with Starbucks holding the rest and continuing to own and license the brand and its intellectual property.

Boyu will acquire the stake based on a cash- and debt-free enterprise value of $4 billion, gaining a controlling interest in Starbucks’ second-largest global operation after the U.S.

Boyu was established in 2011, according to its website, and has offices in Hong Kong, Beijing, Shanghai, and Singapore. Alvin Jiang, a grandson of China’s former President Jiang Zemin, was among the founders.

As of the end of its financial year in September, the U.S. and China comprised 61% of Starbucks’ global stores, with 16,864 locations across America and 8,011 in China. However, Starbucks has been struggling in both markets.

Starbucks estimated the total value of its China retail business at over $13 billion, taking into account the sale to Boyu, the U.S. company’s retained interest, and the net present value (NPV) of licensing over the coming years.

Both parties expect the deal to be finalized by March, after clearing required regulatory approvals.

“Boyu’s deep local knowledge and expertise will help accelerate our growth in China, especially as we expand into smaller cities and new regions,” Brian Niccol, Starbucks’ chairman and CEO, said in the company’s statement.

Alex Wong, partner at Boyu Capital, praised the brand value built in China over the last 26 years, while vowing to expand the business further.