May 4, 2018 / 5:00 PM / 23 days ago

Nestle close to deal for Starbucks bagged coffee, drinks business: reports

LONDON (Reuters) - Nestle, the world’s largest coffee company, is close to a deal with Starbucks Corp for the part of its business that sells bagged coffee and drinks in supermarkets, according to media reports on Friday.

The Nestle logo is seen during the opening of the 151st Annual General Meeting of Nestle in Lausanne, Switzerland April 12, 2018. REUTERS/Pierre Albouy

Any deal between the coffee giants would not involve any of the Seattle-based chain’s more than 28,000 cafes, according to Bloomberg, which reported the news after Swiss financial blog Inside Paradeplatz.

The deal could net Starbucks $3.8 billion after tax, according to Cowen analysts, based on Starbucks’ operating earnings excluding its K-Cups and the multiple recently paid for Keurig Green Mountain. They predicted Starbucks would use that to buy back shares.

An agreement will probably be announced on Monday, Bloomberg said.

Nestle and Starbucks both declined to comment.

Starbucks, which last week reported a global drop in quarterly traffic to its established cafes, has been revamping its business. It recently sold its Tazo tea brand to Unilever for $384 million and closed underperforming Teavana retail stores.

Starbucks previously licensed its business selling packaged coffee to Kraft Foods, but ended the agreement in 2011, giving the business to privately held Acosta Inc.

The cafe chain’s partnership with Kraft had been due to end in 2014, but Starbucks sought an early exit and was later forced by an arbitrator to pay $2.76 billion to Kraft, which by then had split into two. The payment went to Mondelez International.

Nestle, also the world’s largest packaged food company, has various licensing deals with other companies. Nestle sells General Mills’ Haagen-Dazs brand in the United States and Hershey sells Nestle’s KitKat in the United States.

A Starbucks store is seen inside the Tom Bradley terminal at LAX airport in Los Angeles, California, U.S. on October 27, 2015. REUTERS/Lucy Nicholson/Files

Reporting by Martinne Geller in London and Lisa Baertlein in Los Angeles; Editing by Edmund Blair

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