Beverage Industry

Starbucks to acquire Teavana for $620 million

November 15, 2012

Starbucks Coffee Co., Seattle, has agreed to acquire Teavana Holdings Inc., Atlanta, for $620 million in cash. The closing is expected to occur by the end of the year, following receipt of regulatory clearances.

Starbucks plans to continue to grow and extend Teavana’s 300 mall-based stores as well as add a high-profile neighborhood store concept that will accelerate Teavana’s domestic and global footprint.

“We believe the tea category is ripe for reinvention and rapid growth,” said Howard Schultz, chairman, president and chief executive officer for Starbucks, in a statement. “The Teavana acquisition now positions us to disrupt and lead, just as we did with espresso starting three decades ago. Teavana’s world-class tea authority, coupled with the romance and theater of the retail experience that is the heart and soul of Starbucks’ heritage, will create a differentiated customer experience and business opportunity that delivers immediate value to shareholders. This complements our existing Tazo brand and gives us the unique opportunity to create a two-tiered market position.”

Andrew Mack, chief executive officer and co-founder of Teavana, has committed to staying with the company and leading Teavana’s day-to-day operations.

“By contributing deep tea expertise, global sourcing capabilities and a passion for the category that is second to none in our industry, we believe we can deliver an elevated tea experience together with Starbucks,” he said in a statement. “After growing Teavana for 15 years, we are thrilled that Starbucks will be able to truly fulfill our mission of bringing premium tea to millions of people on a global platform. It is with great respect for what Howard and his team have built that we join the Starbucks family.”

Just as Starbucks pioneered a new retail experience for coffee and espresso, the company’s acquisition of Teavana provides the opportunity to do the same within the rapidly growing $40 billion global tea category. In 2013, Starbucks will integrate its assets, including its leading position in social and digital media as well as its 10 million member global loyalty program and card and mobile payment platforms, with the Teavana customer experience to expand Teavana’s current mall-based store footprint with a comprehensive design strategy that will include new Teavana neighborhood locations in markets across North America and around the world. Teavana recently opened its first store in the Middle East in partnership with Starbucks’ existing joint venture partner Alshaya, and has plans to enter new, high-consumption tea markets around the world in the years ahead.

Starbucks’ investment in Teavana is matched by its commitment to continue to grow the Tazo business, giving Starbucks a two-tiered market position for tea. Starbucks’ plan is to define a new, elevated platform of tea experience and education and for both the Teavana and Tazo brands to grow and complement each other while elevating the entire category through a combination of expertise and assets.

Jeff Hansberry, president of channel development and emerging brands for Starbucks, will assume leadership of the new subsidiary upon closing.

“The acquisition of Teavana supports our growth strategy to innovate with new products, enter new categories and expand into new channels of distribution,” he said in a statement. “Evolution Fresh, La Boulange and now Teavana demonstrate how Starbucks will add brands that strengthen our core offering and create a rich ecosystem of experiences with shared values, mutual efficiencies and complementary characteristics, thus forming tangible examples of the success of the Starbucks Blueprint for Growth and a differentiated health and wellness offering in the marketplace.”

Starbucks expects the acquisition to be accretive to earnings by approximately $0.01 per share in fiscal year 2013, based off of the previously announced earnings targets. Teavana stockholders of record will receive $15.50 per share in cash in the merger, which will result in Teavana becoming a wholly owned subsidiary of Starbucks.