Industry News | April 16, 2003

Starbucks to Acquire Seattle's Best Coffee

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Starbucks Corporation has announced it has entered into an agreement to acquire Seattle Coffee Company, which includes the Seattle's Best Coffee and Torrefazione Italia Coffee brands, from AFC Enterprises.

In a statement Starbucks said it intends to further develop both brands and "maintain the distinct coffee flavor profiles that SBC and TI customers enjoy."

Starbucks' primary interest in Seattle Coffee Company would seem to be its wholesale business, which is strong in both the SBC and TI brands. Whole bean and ground coffees under these brands are currently sold to supermarkets and foodservice accounts comprising approximately 12,000 points of national distribution, including more than 5,000 supermarkets. For AFC, the sale allows the company to concentrate on being a franchisor, not a wholesaler, AFC chief exec Frank Belatti told QSR.

The $72 million all-cash, stock purchase transaction is expected to close within 90 days, subject to certain conditions and standard regulatory review. Starbucks expects integration costs related to the acquisition will reduce fiscal 2003 earnings by approximately $0.01 per share. Accordingly, the company has adjusted its fiscal 2003 earnings per share target to $0.66-$0.67 from $0.67-$0.68.

The acquired business is expected to contribute positively to earnings beginning in fiscal year 2004, and the company believes it will be an important contributor to Starbucks' stated earnings per share growth goal of approximately 20-25 percent over the next three to five years. Other terms of the agreement were not disclosed.

As part of the transaction, Starbucks will acquire 129 company-operated and franchised Seattle's Best Coffee locations and 21 company-operated Torrefazione Italia locations in the U.S. and Canada. Following the acquisition, all existing agreements will continue to apply and govern the relationship with the SBC franchisees in the U.S. and Canada. Immediately prior to closing, SBC's franchise agreements for retail locations in Hawaii, SBC's existing international markets, and on U.S. military bases will be assigned to AFC.

Seattle's Best Coffee was founded in 1970 and is one of the oldest brands in the domestic specialty coffee business. All coffees are selected from Arabica beans from around the world and are roasted using Northern European roasting techniques. SBC also produces a complete line of whole bean and ground coffees including Organic and Fair Trade coffees as well as flavored coffees.

The Torrefazione Italia Coffee brand, founded in 1986, mirrors the unique roasting preferences of various Italian regions.

The announcement continues a string of shake-ups at AFC. The company has been named in several class-action lawsuits as a result of accounting practices that were called into question by new auditor KPMG. In addition, both Jon Luther, president of AFC's Popeyes Chicken and Biscuits concept, and Ellen Hartman, vice president of communications for AFC, have left the company for other positions in recent months.

News and information presented in this release has not been corroborated by QSR, Food News Media, or Journalistic, Inc.