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Starbucks (SBUX) To Buy Loose-Leaf Teas Retailer Teavana (TEA) For $620M

 November 14, 2012 03:22 PM

(By Balaseshan) Starbucks Corp. (NASDAQ: SBUX) said it has agreed to buy specialty loose-leaf teas retailer Teavana Holdings Inc. (NYSE: TEA) for about $620 million in cash. Following the news, shares of TEA jumped more than 52% in regular trade.

Teavana stockholders of record will receive $15.50 per share in cash, representing a 53% premium from Tuesday's closing price. The merger will result in Teavana becoming a wholly-owned subsidiary of Starbucks.

Starbucks expects the acquisition to be accretive to earnings by about $0.01 per share in fiscal 2013, based off of the previously announced earnings targets. Stockholders of Teavana holding about 70% of the outstanding common shares have approved the merger agreement by written consent.

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"We believe the tea category is ripe for reinvention and rapid growth. The Teavana acquisition now positions us to disrupt and lead, just as we did with espresso starting three decades ago," said Howard Schultz, Starbucks chairman, president and CEO.

Just as Starbucks pioneered a new retail experience for coffee and espresso, the company's acquisition of Teavana provides the opportunity to do the same within the rapidly growing $40 billion global tea category

Together, Starbucks and Teavana will jumpstart the next wave of growth in this dynamic category, leveraging Starbucks core competencies of real estate, design and store operations and integrating these with Teavana's world-class tea authority, global sourcing capabilities, merchandising and best-in-class retail store unit economics.

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Powered by Starbucks existing infrastructure, Starbucks plans to continue to grow and extend Teavana's already-successful 300 mall-based stores as well as add a high-profile neighborhood store concept that will accelerate Teavana's domestic and global footprint. The closing is expected to occur by year end, following receipt of regulatory clearances.

TEA is trading 52.47% higher at $15.44 on Wednesday, while SBUX trades down 2.01% at $49.30.



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