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Starbucks (NASDAQ:SBUX) is still in advanced discussions to sell a significant portion of its China business, with the process attracting widespread attention from global investors. Reports indicate that Starbucks’ (NASDAQ:SBUX) China operations have received bids valuing the business at up to $10 billion and that almost 30 domestic and international private equity firms have submitted non-binding offers.
The Seattle-based company is expected to retain a majority ownership position in the China business.
Stifel analyst Chris O’Cull expects Starbucks (SBUX) management will provide an update on the company’s progress in identifying potential partners and offer an assessment of the core strategic challenges in the market.
“We do not expect the financial terms of a potential transaction to significantly alter SBUX’s overall market valuation; we expect a deal could be modestly dilutive but also support deleveraging,” wrote O’Cull. The Stifel view is that investor reaction will hinge more on the track record of the partner and the structure of the partnership than on the headline financials.
Overall, O’Cull and his team remain focused on the U.S. turnaround progress, calling it the primary catalyst for share appreciation over the next 12 months. “However, securing a strategic partner with a strong track record in China could be well received by investors, as it should enhance Starbucks’ ability to gain share in a growing market,” he highlighted.
Shares of Starbucks (SBUX) have seen sideways action over the last six weeks, clawing out a gain of 0.9%. The coffee chain operator is expected to post its FY3 earnings report during the last week of July.