Boyu Seeks $1.4 Billion for Starbucks China Takeover

Watch Boyu Seeks $1.4 Billion for Starbucks China Takeover - Bloomberg on Dailymotion

Transcript

00:00Good morning. Welcome back. You're watching The China Show. Let's get to some other news this

00:03morning. So Starbucks is selling a majority stake in its China unit, the private equity

00:09firm, Boyu Capital. The price tag there, $4 billion. And the coffee chain shares rose in

00:14late trade after the announcement. You see that on your screens. Let's bring in our Asia Global

00:18Business Managing Editor, Rachel Chang, in our Hong Kong studios for us. Yeah, so Rachel,

00:24we've been tracking the ins and outs of the story. And finally, we're here. Finally, we have a price

00:29tag. How did Boyu emerge as the winner here? Right, exactly. So we broke the news last week,

00:36of course. You know, there were a lot of bidders in this process. And Boyu really emerged as the

00:42winner because, first of all, it's a Chinese private equity firm, which means that its connections on

00:46shore is going to be that much stronger for Starbucks. You know, we're already seeing that

00:50happening. We just broke another piece of news, which is that Boyu is going to be looking for

00:54over a billion in a leveraged loan from Chinese banks to finance this 60% stake. You know,

01:01Boyu also recently closed a really big deal for China's biggest chain of luxury malls, SKP.

01:07That means that there's probably going to be a lot of synergies available for Starbucks

01:10outlets in those malls, for example. And, you know, ultimately, I think it was really that

01:14strategy and those Chinese mainland connections that helped Boyu beat out these other global PE

01:20firms that were very interested in a stake as well, because that's really what Starbucks has been

01:25missing in China. Yeah, this coming out of time, they've been struggling for years now. Even Luckin

01:32has surpassed them in being the largest coffee chain there. So you are seeing these local domestic

01:37winners emerge in all this. And this is really kind of the next chapter for Starbucks. What does it

01:42mean for them now? Right. I think that's really the biggest question, because for a long time now,

01:48you know, people have been pressuring Starbucks to say, look at all you're getting beat by all

01:52these Chinese chains, you know, the Luckin model, quick turnaround, low cost, smaller stores. But,

01:58you know, Starbucks has been trying to hold quite firm to its idea that it's a different kind of

02:02business. It's premium. It's going to sell lattes at three times the price because it has these

02:06beautiful stores where people can hang out. So, you know, I think what we're looking to next is

02:10whether that kind of model will really survive now that private equity is in charge. China is a very

02:15different type of industry, a different type of market where consumers are looking for different

02:19things. So, you know, in a couple of years, Starbucks in China might be quite unrecognizable

02:23from what we know Starbucks elsewhere to be. You know, now we have a Chinese PE firm in charge,

02:28and we'll probably be looking to grow those margins very quickly.