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Starbucks To Exit Its South Korean JV Which Is Valued At Over $2 Bln


07/27/2021


Starbucks To Exit Its South Korean JV Which Is Valued At Over $2 Bln
Its joint venture in South Korea is will be ended by Starbucks Corp as the company has decided to sell off a part of its stake to local partner E-Mart Inc and the rest of its share to GIC, Singapore's sovereign wealth fund. The value of the Starbucks joint venture is touted to be valued at more than $2 billion.
 
Starbucks said in a filing on Tuesday that currently, half of the joint venture is owned by one of the largest retailers in South Korea, e-Mart which will now purchase an additional 17.5 per cent stake of the joint venture, called Starbucks Coffee Korea, for $411 million.  
 
E-Mart will continue to operate the Starbucks stores.
 
The remaining 32.5 per cent of the joint venture will be owned by GIC.
 
The purchase price e-Mart for the 17.5 per cent also indicates that the entire business is potentially valued at $2.35 billion and according to reports, more than $700 million for its stake will have to be paid by GIC according to the valuation.
 
No comment on the deal value was made by GIC.
 
Starbucks said the deal is expected to be completed over the next 90 days. South Korea is the fifth largest market for the United States based coffee giant..
 
"South Korea continues to be an important market for Starbucks," Michael Conway, Starbucks' group president for international and channel development, said in a statement.
 
"Part of our success in South Korea - and in many of our international markets - is due to our expertise and judgment in knowing when to rely on local partners to continue to build the business," Conway added.
 
Starbucks Coffee Korea currently operates in 78 cities in the country and operates through more than 1,500 stores. In the January-March quarter, the operating profit of the company grew by almost three quarters to 45.4 billion won ($39.5 million). The company’s earnings dropped by 6 per cent year on year un 2020 because of the pandemic related restrictions.
 
No explanation on why the US coffee giant agreed to divest its stake in the East Asian country was offered by Starbucks Korea.
 
There was currently no more comment beyond its press statement, a Hong Kong-based official of a firm representing Starbucks told the media.
 
"Starbucks and E-Mart have had many conversations on how we can continue to grow the Starbucks brand in the market, which led to this decision," said T.J. Hyung, Executive Vice-President of E-Mart, which operates a nationwide network of over 160 hypermarkets, discount stores, and other specialty stores.
 
The disruption caused by the pandemic in the Asian e-commerce industry prompted e-Mart, and its parent Shinsegae Group, to acquire some businesses.  
 
The license agreement between Starbucks Coffee Korea and Starbucks will continue to be in force just as it was when it was a joint venture between Starbucks and Shinsegae Group, said a Shinsegae spokesperson.
 
(Source:www.marketscreener.com)