Nestle (VTX: NESN) will pay Starbucks $7.2 billion (£5.2 billion) in cash to sell the company’s coffee around the world.
The Swiss-based food giant will own the rights to market Starbucks coffee (NASDAQ: SBUX) in a “significant step” for the group.
“This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestle,” said Kevin Johnson, Starbucks chief executive.
Mark Schneider, Nestle’s chief executive, announced the group’s third biggest acquisition with plans to boost the company’s profits through expansion.
Schneider described the deal as “a great day for coffee lovers around the world”.
The Nescafe and Nespresso owner said that 500 Starbucks employees will transfer over to Nestle business but will remain located in Seattle.
Matthew Barry, an analyst at Euromonitor, said the deal was important for Nestle who is attempting to reinforce its position as the world’s biggest coffee company.
“Nestle is far and away the largest hot drinks company globally, with more in sales than the next five largest hot drinks companies combined.”
“However, Nestle’s leadership position is less secure than it once was,” he said.
Despite the deal between the coffee giants, a Nestle source revealed that the Nestle name will not appear on Starbucks products in order to avoid consumers “to perceive that Starbucks is now part of a bigger family.”
Nestle expects the deal to contribute positively to its earnings per share and growth targets in 2019.
Previous deals with Nestle include the 68 percent stake it purchased in Blue Bottle Coffee for $425 million last year. The group also sold its US sweets and chocolate business to Ferrero Group for 2.7 billion Swiss francs (£1.9 billion).
Nestle shares rose 0.5 percent in early trading.
