(Nov 19): Boyu Capital is considering bringing in Tencent Holdings Ltd, GIC Pte Ltd and potentially others as limited partners in its acquisition of a stake in Starbucks Corp’s China business, people familiar with the situation said.
The private equity firm, which has agreed to buy as much as 60% of the Chinese business, is looking to expand Starbucks in smaller cities to drive growth in its second-biggest market, the people said. It also plans to open more branches at tourist attractions, subways and airports, where foot traffic is high, they said.
Deliberations are ongoing and may not result in an agreement, the people said, asking to not be identified because the information isn’t public.
Boyu didn’t immediately respond to requests for comment. Representatives of Starbucks, GIC and Tencent declined to comment.
Starbucks is among several foreign retailers turning to local partners to help improve their fortunes in China amid stern competition from domestic rivals. Restaurant Brands International Inc last week reached a deal to sell a controlling stake in Burger King’s operations in China to asset manager CPE.
Starbucks has about 8,000 stores in China, a market it first entered in 1999, and it has said it plans to expand that number to about 20,000. The headquarters of the business in the country are in Shanghai.
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Boyu is also in talks with banks for a loan of the equivalent of about US$1.4 billion ($1.8 billion) to support its acquisition of the China business, people familiar with the matter have said. The Chinese retail operations are valued at around US$4 billion.
The joint-venture agreement between Starbucks and Boyu is expected to be finalised in the second quarter next year.
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