Boyu Capital seeks around $1.4 billion loan for Starbucks China takeover

By Jackie Cai, Apple Ka Ying Li and Kari Lindberg

 

Private equity firm Boyu Capital is in talks with banks for a loan of around $1.4 billion-equivalent to support its acquisition of a majority stake in Starbucks Corp.’s China business, according to people familiar with the matter.  

Chinese banks will likely lead the financing for Boyu Capital, said the people, who asked not to be identified discussing private matters. The deal may be structured as a yuan-denominated onshore loan, they said, adding that discussions are fluid and could be subject to change.

 

Starbucks announced on Tuesday that it will sell a majority stake in its China retail operations, which are valued at $4 billion, Bloomberg News reported, citing a company statement. Boyu will hold up to a 60 per cent interest, while the coffee seller will hold the remaining 40 per cent and will continue to license the brand and intellectual property through a joint venture, the statement said.

 

If the Starbucks deal goes through, the loan would be among the largest leveraged buyout financings originating from China this year, according to Bloomberg-compiled data. It would also add to a growing pipeline of borrowings supporting mergers and acquisitions in the region. 

 

Recent transactions include a potential euro-denominated loan to help fund JD.com Inc.’s proposed takeover of German electronics retailer Ceconomy AG. Earlier in the year, venture capital firm HongShan Capital Group raised a €475 million ($548 million) facility to fund its purchase of audio equipment maker Marshall Group AB.

 

Representatives for Boyu and Starbucks didn’t immediately respond to requests for comment regarding the financing. 

Boyu, Carlyle, EQT AB, FountainVest Partners, KKR & Co., Hillhouse Investment and Primavera Capital were among the private equity firms invited to participate in the process to buy a stake in Starbucks China, Bloomberg News reported in August. Several of these firms were in discussions with lenders, including global banks, to secure financing for their bids, the people said. 

 

Starbucks, which opened its first Chinese outlet in Beijing in 1999 and now has about 7,800 stores in more than 250 mainland cities, shortlisted about a dozen potential investors for its China business, including technology companies and private equity firms.