Starbucks in advanced talks to buy SodaStream stake

Daniel Birnbaum

Starbucks seeks 10% of SodaStream at a company value of $1.1 billion

Sources inform ''Globes'' that Starbucks Corporation (Nasdaq: SBUX) is in advanced talks to acquire 10% of SodaStream International Ltd. (Nasdaq: SODA) at a company value of $1.1 billion. SodaStream has a market cap of $850 million; Starbucks' offer reflects a 30% premium on the market price. Sources close to the deal say that an official announcement will be made soon.

The move comes 11 years after the failure of Starbucks' Israeli franchisee Delek Group Ltd. (TASE: DLEKG) to operate the US cafe chain in Israel.

Market sources have previously believed that SodaStream was seeking a partner, like the partnership between Coca-Cola Company (NYSE: KO) and coffee machine maker Green Mountain Coffee Roasters Inc. (Nasdaq: GMCR). The two companies plan to launch a home soda maker machine, which could make carbonated beverages from Coca-Cola syrups, next year. This would increase the competitive pressures on SodaStream, compelling it to seek a strategic partner of its own.

February's acquisition of 10% of Green Mountain by Coca-Cola for $1.25 billion initially sent SodaStream's share price tumbling, amid market fears of Coca-Cola's massive entry into the home beverages maker market. The share price more than recovered by the end of the session, amid speculation that SodaStream would respond with a similar collaboration, and the realization that Coca-Cola's move actually validated SodaStream's business model.

Despite SodaStream's clear advantages, its machines are found in only 1% of American homes, compared with 25% of homes in many European countries, such as Sweden. Collaboration with Starbucks would give SodaStream a distribution platform and marketing incentives, such as sales campaigns and special flavors for Starbucks customers.

SodaStream said in response, "There are always rumors surrounding the company. The company has not responded to rumors in the past, and it will not respond now."

Published by Globes [online], Israel business news - www.globes-online.com - on April 23, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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Daniel Birnbaum
Daniel Birnbaum
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