Analysts skeptical of reportedly explored Starbucks-Chipotle deal
SBUX•Starbucks has explored a potential takeover of Chipotle, the Financial Times reported, but analysts questioned the deal’s strategic logic, financing and potential impact on Starbucks’ turnaround.
1. Analysts question deal logic
BTIG said it was “highly skeptical” of a deal, citing operational and supply-chain differences, potential dilution for Starbucks shareholders and disruption to both brands’ management. William Blair saw no obvious revenue synergies and limited sourcing benefits, while D.A. Davidson put the chances of a deal at 20% or lower.
2. Financing and execution concerns
William Blair analyst Sharon Zackfia said Starbucks’ $9.4 billion in net debt as of June could make financing difficult and lift the combined company’s leverage to about six times. EMarketer analyst Suzy Davidkhanian said CEO Brian Niccol’s familiarity with Chipotle could lower execution risk, but Starbucks investors may view a deal as an “expensive distraction” from its turnaround. Starbucks declined to comment, saying it remains “laser focused” on its turnaround.
