(Nov 6): Chinese lenders are nearing a deal to help finance Boyu Capital’s acquisition of a 60% stake in Starbucks Corp’s China retail business — shutting foreign banks out of the top slots, according to people familiar with the matter.
Ping An Bank Co, Industrial Bank Co, and China Minsheng Banking Corp are set to arrange a seven-year syndicated loan of about US$1.4 billion, though terms are still under negotiation and the list of banks has yet to be finalised, the people said, asking not to be named because the matter is private. The facility would help finance Boyu’s payment for the acquisition as well as working capital and expansion needs for the new joint venture.
The discussions come as local and foreign banks are jostling for a role in one of the largest leveraged buyout financings originating from China this year. Starbucks this week agreed to sell the controlling stake in its China arm to Boyu at a US$4 billion enterprise value in a bid to improve the coffee chain’s flagging business in the country.
The potential exclusion of global banks from the current financing talks highlights the dominance of Chinese lenders in funding large-scale onshore mergers and acquisitions.
China Merchants Bank Co, once seen by market participants as the front runner to arrange the financing, is also poised to lose out after initially backing a competing bidder, the people said. The episode also underscores growing competition among domestic lenders in China’s syndicated loan market, where securing mandates for high-profile deals has become increasingly strategic.
Boyu, Starbucks, Ping An Bank, Industrial Bank, China Minsheng Bank and China Merchants Bank didn’t immediately respond to requests for comment.
See also: SoftBank explored potential takeover of US chipmaker Marvell earlier this year — Bloomberg
Starbucks will retain a 40% stake in the business and continue to own its brand and intellectual property rights after the transaction.
The partnership aims to accelerate the coffee giant’s expansion in China, where it currently operates about 8,000 stores and plans to grow that number to 20,000 in the coming years.
Starbucks is the latest foreign retail business to enlist a local partner to turn around their ailing fortunes in China, as a persistent property slump sours consumer appetite for everything from premium luxury goods to ice creams. General Mills, which owns Häagen-Dazs, is also working on a potential sale of its more than 250 stores in China. Restaurant Brands International Inc is also said to be mulling a sale of a controlling stake in Burger King’s China business to local private equity firms.
See also: Goldman CEO sees tremendous backlog of large M&A deals
Boyu’s connections in China is likely to have been a winning factor in Starbucks’ view. The private equity firm’s expertise in commercial real estate and property management — it recently bought a controlling stake in an operator of China’s top luxury malls SKP and also controls property management services provider Jinke Smart Services Group — could help the coffee chain refine and expand its store network.
Uploaded by Tham Yek Lee
