This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Starbucks Becomes Caffeine-Fueled IBM With Teavana Buy

NEW YORK ( TheStreet) -- In a continued expansion of its in-store food and drinks products, Starbucks (SBUX - Get Report) is buying Teavana (TEA), a tea-inspired drinks chain, for $15.50 a share, in an all cash deal that values the company at $620 million.

The move follows Starbucks previous acquisitions of Evolution Fresh, a fruit juices specialist, and La Boulange, a bakery chain - and further proves chief executive Howard Schultz's commitment to grow the world's leading coffee chain through a mix of new store openings, product launches and acquisitions.

Starbucks also said it considers Teavana to be a third deal, in a string of acquisitions that meets the company's "Blueprint for Growth," a growth strategy that resembles the one employed by IT services giant IBM (IBM - Get Report).

Heading into 2013, CEO Schultz will now need to prove he can deliver on IBM-like profit growth, as Teavana and other recent acquisitions take center stage in the earnings outlook for the Seattle-based brewer. Recent earnings strength signals Starbucks is finding increasing success in growing profit margins.

Starbucks will also need to jolt growth at Teavana, after the company's same store sales growth slowed in recent quarters, putting shares well below their Aug. 2011 initial public offering price.

As with previous acquisitions, Starbucks indicated it intends to weave Teavana's products and merchandising into Starbucks existing stores, while also expanding the tea-makers branded retail outlets. CEO Schultz also indicated Teavana will be a strong complement to Starbucks Tazo tea brand.

"This complements our existing Tazo brand and gives us the unique opportunity to create a two-tiered market position," Schultz said, in a statement announcing the deal.

"Powered by Starbucks existing infrastructure, Starbucks plans to continue to grow and extend Teavana's already-successful 300 mall-based stores as well as add a high-profile neighborhood store concept that will accelerate Teavana's domestic and global footprint," the company added in a press release.

According to Starbucks calculations, Teavana is expected to add 1 cent to the company's fiscal 2013 earnings. Roughly 70% of Teavana's shareholders have approved the merger 'by written consent,' notes Starbucks of the deal, which it expects to close by year-end.

In Wednesday trading, Starbucks shares fell nearly 3% to $48.84, while Teavana's shares surged over 50% to $15.45, just below Starbucks cash offer.

In spite of Wednesday stock gains, Teavana shares are off nearly 20% in 2012, while Starbucks has gained over 6% year to-date.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
IBM $160.67 0.00%
SBUX $47.62 0.00%
AAPL $124.75 0.00%
FB $80.78 0.00%
GOOG $524.05 0.00%

Markets

DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs