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Starbucks to roast Europe
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April 29, 1998: 11:21 a.m. ET
Buying Seattle Coffee, U.S. chain launches sip-by-sip sally into Europe
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NEW YORK (CNNfn) - The hipper, slicker "Cool Britannia" of Spice Girls-and-Tony Blair fame is warming up for a new arrival: Starbucks coffee.
Armed with little more than brand-name braggadocio and an arsenal of aromatic blends, Starbucks Coffee Co. said Wednesday it had agreed to acquire British-based Seattle Coffee Company as the first thrust in a sip-by-sip sally into one of the largest tea-drinking countries in the world.
Starbucks' battle plan calls for using London's caffeine-craving populace of 9 million as a springboard to opening 500 retail locations in Europe by 2003 - and, potentially, another 500 in Asia by the same date.
"Europe has always represented a major strategic opportunity to achieve our goal of creating and building an enduring global brand," said Howard Schultz, Starbucks' chairman and chief executive officer.
"London, a city where creativity and innovation have always flourished, provides a significant home for Starbucks and a significant gateway into Europe," Schultz added.
Under the proposed transaction, Starbucks will acquire Seattle Coffee, founded in 1995 by two expatriate Seattle natives homesick for a home-brewed jolt, for about 1.8 million shares of Starbucks stock. That would value the deal at around $84.6 million, based on Starbucks' Tuesday closing price of $47.
The deal will be accounted for as a pooling of interests. It is expected to result in an after-tax dilution in per-share earnings of roughly 6 cents in 1998 and 5 cents in 1999. Starbucks also said it expects a one-time after-tax charge of about 14 cents a share in the third quarter of 1998.
Under the deal's terms, Seattle natives Ally and Scott Svenson will continue to run the integrated businesses in the United Kingdom, with support from Starbucks.
Seattle Coffee currently runs 56 Starbucks-style retail stores in Great Britain, making it the leading specialty coffee company in the country. The company plans to open 30 additional stores by the end of 1998.
'A true homecoming'
The Svensons said Wednesday that the Starbucks buyout placed their company in an optimal position to slake British thirst.
"Joining forces with Starbucks feels like a true homecoming for us as the two companies share a common culture, a commitment to great coffee, similar company values and mutual respect for people," Ally Svenson said. "To a certain extent, we have spent the last three years getting the UK streets warmed up for the arrival of Starbucks."
Starbucks is the leading retailer, roaster and specialty-coffee seller in North America.
In another development, Starbucks said Wednesday its net revenues rose 41 percent to $98.4 million for the four-week period ended April 26, from $69.8 million for the same period a year earlier. Same-store sales increased 9 percent over the period.
Starbucks stock (SBUX) was up 2-5/8 at 47-11/16 in early trading Wednesday on the New York Stock Exchange.
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