Starbucks exits $2.4bn South Korea joint venture
US coffee giant sells its 50% stake to local partner E-Mart and Singapore’s sovereign wealth fund
Seoul — Starbucks is withdrawing from its joint venture in South Korea, which is valued at more than $2bn, and will sell part of its stake to local partner E-Mart and the rest to Singapore’s sovereign wealth fund, GIC.
E-Mart, one of the largest retailers in South Korea which owns half of the venture will buy an additional 17.5% of Starbucks Coffee Korea for $411m, it said in a filing on Tuesday, and will continue to operate the stores. GIC will own the remaining 32.5%.
This suggests a $2.35bn valuation for the entire business, and that GIC will pay more than $700m for its stake, according to Reuters calculations.
GIC declined to comment on the deal value.
Starbucks said the transaction is expected to be completed over the next 90 days. The US coffee giant counts South Korea as its fifth-largest market.
“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.”
With more than 1,500 stores across 78 cities, Starbucks Coffee Korea’s operating profit surged almost 75% to 45.4bn won in the three months to end-March. In 2020, earnings fell 6% from earlier amid the height of the coronavirus pandemic.
Starbucks Korea, however, declined to comment on why the US coffee giant agreed to divest its stake.
“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 more than 160 hypermarkets, discount stores and other speciality stores.
E-Mart, and its parent Shinsegae Group, have leveraged a pandemic-led disruption in the Asian e-commerce industry to buy up some businesses.
A Shinsegae spokesperson said Starbucks Coffee Korea would continue it's a licencing agreement with Starbucks, as it has been when it was a joint venture between Starbucks and Shinsegae Group.
E-Mart said last month it would buy most of eBay’s South Korean business for $3bn, while another affiliate of Shinsegae, SSG.COM Corp, bought an online shopping mall for 265bn won in April.
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