Starbucks has found a buyer for its sluggish China business.
The coffee shop giant on Monday announced that it is selling a 60% stake in its retail business to Boyu Capital in a deal valued at $4 billion.
Starbucks and the private-equity firm will form a joint venture. The coffee chain will retain a 40% stake in the business.
The sale follows more than a year of discussions and sale talks on the fate of the business, which has had struggles mirroring the brand’s U.S. problems as lower-priced competitors such as Luckin have flooded the market with locations.
Starbucks operates 8,000 locations in the country and has been in China for 26 years, but Luckin recently overtook the chain to be the largest coffee concept in the country, both by sales and unit count. Still, Starbucks executives have long expressed confidence in the future of the market, and media reports had previously indicated plenty of interest from potential buyers.
“We’ve had very strong interest from multiple, high-quality partners, all of whom see significant value in the Starbucks brand and team,” Starbucks CEO Brian Niccol told analysts last week. “We expect to retain a meaningful stake in Starbucks China and remain confident in the long-term growth potential of the region.”
Boyu Capital was founded in 2011 and has offices in Hong Kong, Beijing, Shanghai and Singapore. The first focuses on technology, consumer and retail and healthcare sectors. Boyu and Starbucks believe that the coffee chain can have 20,000 locations in the country.
“This partnership reflects our shared belief in the enduring strength of [Starbucks] and the opportunity to bring even greater innovation and local relevance to customers across China,” Alex Wong, partner with Boyu Capital, said in a statement.
Same-store sales have started recovering in China. Consumers are coming in more often but are spending less when they do. Same-store sales rose 2% in the quarter ended Sept. 28. The key metric had declined 14% a year ago.
Transaction count rose 9%. But average ticket declined 7%.
Starbucks is hardly the only company seeking answers for China. Restaurant Brands International earlier this year bought out its Burger King operator in China, months after it acquired its Popeyes China business, along with investments in Tim Hortons’ China business, all to spur more growth.
The sale is expected to close early next year.
UPDATE: This story has been updated to clarify that the sale is valued at $4 billion.
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