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M&As

GIC set to buy stake in Starbucks Korea for $700 mn

The sovereign wealth fund may consider Starbucks Korea's IPO as an exit option

By Jul 26, 2021 (Gmt+09:00)

GIC set to buy stake in Starbucks Korea for 0 mn

Singapore's sovereign wealth fund GIC Private Ltd. is set to sign an agreement next week to buy a 30% stake in Starbucks Korea from the coffeehouse chain's parent company for 800 billion won ($700 million), according to investment banking sources.

As part of the upcoming deal, Seattle-based Starbucks Corp. is selling its remaining 20% stake in the South Korean joint venture to E-Mart Inc. which will eventually end up with a 70% stake in Starbucks Korea. E-Mart is Shinsegae Group's supermarket chain. 

GIC values the country's largest coffeehouse chain at 2.6 trillion won ($2.3 billion), more than double the 1 trillion won estimated back in 2019.

With Shinsegae in charge of its operations, GIC will lead the decision-making process for Starbucks Korea's possible stock market listing after a certain period of time.

But the agreement will not contain a clause that requires Shinsegae to buy back the GIC's stake in case the IPO plan falls through, the sources said on Sunday, denying a local media report that Starbucks Korea's IPO would be a condition attached to the stake sale.

Shinsegae Group, South Korea's retail giant, is looking to create greater synergy from business cooperation with Starbucks, on top of its exclusive right to sell Starbucks goods such as tumblers, water bottles and diaries.

"As the only strategic investor in Starbucks Korea, Shinsegae will be able to explore various business opportunities without limit," said a retail industry source.

GIC set to buy stake in Starbucks Korea for 0 mn

Starbucks Korea, established in 1997 as a 50:50 joint venture between E-Mart and Starbucks Corp., opened its first branch in 1999 and has expanded to 1,503 branches as of December last year.

Its operating profit edged down 6% to 164.4 billion won in 2020 from a year earlier, despite a slight increase in sales to 1.9 trillion won. This year, however, its sales are forecast to top 2 trillion won, driven by contactless sales growth from drive-through ordering and siren ordering which allows customers to order and pay for coffee and food from the app on their mobile phones.

In 2019 and 2020, Starbucks Korea paid out 60 billion won in annual dividends, equivalent to about half of its net profit. Its revenue now exceeds 10% of Starbucks Corp.'s total revenue generated globally, but its operating margin is understood to fall behind the global average.

Including the additional 20% stake purchase of Starbucks Korea, Shinsgae Group will have spent a combined 4.3 trillion won in acquisitions year to date, emerging as the most active player in South Korea's M&A market this year.

Its 2021 acquisitions include a baseball club from SK Group for 100 billion won and an online fashion platform for 265 billion won and an 80% stake in eBay Korea for 3.4 trillion won.

Write to Jun-ho Cha and Jong-woo Kim at chacha@hankyung.com

Yeonhee Kim edited this article.

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