Analysts skeptical of reportedly explored Starbucks-Chipotle deal
SBUX•Starbucks reportedly explored a takeover of Chipotle, but analysts questioned the deal’s strategic logic and financing. Chipotle shares fell about 4% to $31.32 on Friday after rising 6.2% the previous session.
1. Analysts question deal logic
BTIG called the deal operationally questionable, potentially highly dilutive to Starbucks shareholders and disruptive to management. D.A. Davidson put the chances of a deal at 20% or lower, citing differences between the brands and few obvious synergies.
2. Financing and execution concerns
William Blair said Starbucks’ $9.4 billion in net debt as of June would make financing difficult and could raise combined leverage to about six times. Raymond James said supply-chain benefits were likely limited given little menu overlap; EMarketer’s Suzy Davidkhanian said CEO Brian Niccol’s familiarity with Chipotle could lower execution risk, but investors might see a deal as an expensive distraction from Starbucks’ turnaround.
