Overview
- The Financial Times reported on October 8 that Starbucks had explored a takeover of Chipotle and had worked with advisers, a report that sent Chipotle shares up and pushed Starbucks shares down.
- On Monday, October 12 Starbucks told reporters it is not buying Chipotle and said management remains focused on its Back to Starbucks turnaround.
- Analysts said a deal would be difficult to finance because Chipotle’s market value is near $40 billion and a purchase would likely require a mix of debt and equity that could raise leverage and dilute shareholders while Starbucks executes its turnaround.
- Markets reversed quickly after the denial as Chipotle shares fell and Starbucks shares recovered, shifting investor scrutiny back to sales trends, costs and operational problems at both companies.
- The underlying hurdles for any combination include different supply chains and operating models, Chipotle’s recent weaker traffic and food‑safety issues, and Starbucks’ ongoing store, staffing and service overhaul.