Shinsegae takes full control of Starbucks Korea, with a string attached Coffee chain giant has right to repurchase all shares in venture held by Emart

Translated by Ryu Ho-joung 공개 2021-07-29 07:53:02

이 기사는 2021년 07월 29일 07:51 더벨 유료페이지에 표출된 기사입니다.

South Korea’s retail conglomerate Shinsegae Group has taken full control of Starbuck Coffee Korea, a joint venture between its supermarket arm Emart and Starbucks Coffee International (SCI), after acquiring the remaining 50% stake in partnership with Singapore sovereign wealth fund GIC. But the deal comes with a string attached that allows SCI to repurchase all shares in the venture held by Emart.

Emart announced in a regulatory filing on Tuesday that it bought an additional 17.5% stake in Starbucks Coffee Korea from SCI for about 474.3 billion won ($410.2 million).

The transaction increased Emart’s stake in the US coffee chain’s South Korean operations from 50% to 67.5%. In a separate deal, Singapore’s GIC acquired the remaining 32.5% of the company from SCI, the filing said.

Emart also said that under the agreement SCI has a call option, which gives it the right to repurchase all of Emart’s shares in Starbucks Coffee Korea if the license agreement between the two parties either expires or is terminated for a reason attributable to Emart. Particularly, in case of the latter, SCI can buy back shares from Emart at a 35% discounted price.

“The deal is meaningful because we secured control of the South Korea operations of Starbucks, a brand loved by so many people in the country, without a large outlay of money,” said a representative for Shinsegae Group.

The conglomerate accepted unfavorable terms, probably because it placed a bigger focus on advantages that could be gained through the deal.

With Emart’s stake increasing to 67.5%, Starbucks Coffee Korea will become the hypermarket operator’s subsidiary and thus all of its financial statements will be combined into those of the parent company. According to its audited financial statements, Starbucks Coffee Korea last year recorded revenue of nearly 2 trillion won and operating profit of 165 billion won.

Dividend payments to be received from the company will also increase in proportion to increased ownership. Greater collaborations between the coffee chain and Shinsegae’s other affiliates such as ecommerce arm are also possible.

In the longer term, Shinsegae may keep in mind the option to take Starbucks Coffee Korea public on the local bourse. Previously, the conglomerate had reportedly considered selling Emart’s stake in the coffee chain without renewing the license agreement, but eventually dropped the plan because it failed to find a suitable buyer. An initial public offering can be a tool to exit its investment.

However, it is possible that terms of the agreement with SCI, including the call option, may limit synergy benefits between Shinsegae and the coffee chain. The license agreement between Emart and SCI is said to include terms on the launch of new stores. Starbucks Coffee Korea is also not allowed to do business in overseas markets.

“An IPO of Starbucks Coffee Korea is an issue that needs further discussions in the future,” the representative said, adding, “The deal did not include terms that require the company’s listing in a certain period of time.” (Reporting by Hyo-beom Lee)
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