HomeWorld BusinessStarbucks buying Teavana, eyes repeat of coffee success

Starbucks buying Teavana, eyes repeat of coffee success

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NEW YORK – Starbucks Corp (SBUX.O) said on Wednesday it plans to buy tea store chain Teavana Holdings Inc (TEA.N) for $620 million, aiming to replicate the success it has had with its namesake coffee shops.

Report by Reuters

Teavana has about 300 shopping mall stores that sell loose-leaf exotic teas.

In addition to opening stand-alone Teavana stores in the United States and abroad, Starbucks will add tea bars that serve prepared drinks in existing Teavana stores, Starbucks chief executive Howard Schultz said.

Starbucks opened its first espresso bar inside a store in 1987, when it had 11 stores selling only whole bean coffee.

“We will do something very similar over time with Teavana,” said Schultz, who now oversees about 18 000 Starbucks stores around the world. “We will do for tea what we did for coffee.”

The deal marks the third complementary acquisition over the past year from Starbucks, which is looking for new avenues of growth beyond its core coffee business.

On a conference call, Schultz called tea “the opportunity of a lifetime”.

Teavana chief executive Andy Mack is forecasting 500 total Teavana stores by 2015.

The world’s largest coffee shop operator will pay $15,50 per share in cash for Teavana, a 54% premium to the company’s closing price on the New York Stock Exchange on Tuesday.

Shares of Atlanta-based Teavana, which has stores in the US, Mexico, Canada and Kuwait, jumped 52,5% to close at $15,45 on the New York Stock Exchange.

“This could be one of the smartest acquisitions that Starbucks has done yet,” said William Blair&Co analyst Sharon Zackfia, who covers both Starbucks and Teavana.

“The valuation was great for this kind of fast-growing retailer,” she said, adding that the unit economics at Teavana are “exceptional” and proven across every geography in the US.

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