(Bloomberg) -- Nestle SA is close to a deal for parts of Starbucks Corp.’s business that sells coffee beans and drinks in supermarkets, according to a person familiar with the situation.
An agreement will probably be announced Monday, according to the person, who didn’t want to be identified as it isn’t public yet. Terms were not immediately available. The deal would not involve the Seattle-based company’s cafes.
The transaction could generate about $3.8 billion in after-tax cash proceeds for Starbucks, according to Andrew Charles, an analyst at Cowen. Starbucks could use the proceeds to fund stock buybacks, he said in a research note.
The first tie-up with a major rival in coffee underlines Nestle’s efforts to capture more upscale java drinkers in the U.S., where the maker of Nespresso and Nescafe has been outpaced by JAB Holding Co. The investment company of Europe’s billionaire Reimann family has spent more than $30 billion building its coffee empire with acquisitions, including Keurig Green Mountain and Peet’s.
The shares rose as much as 2.3 percent to $57.42 on Friday.
Starbucks holds the crown in the $13.8 billion U.S. coffee market, while Nestle ranks fifth behind Green Mountain and Kraft Heinz, according to Euromonitor. Starbucks has been examining each of its businesses to streamline its operations and focus on those that add most to sales and profit, Chief Financial Officer Scott Maw said on a conference call in January.
Representatives for Nestle and Starbucks declined to comment.
Starbucks’s consumer-packaged-goods business, which also includes some ready-to-drink beverages, generated 8 percent of the company’s sales, or about $1.8 billion, in the 2017 fiscal year. The unit could be worth about three times its sales, estimates Warren Ackerman, an analyst at Societe Generale.
Nestle last year added niche brands Blue Bottle Coffee and Chameleon Cold-Brew to expand its portfolio. Nespresso introduced a machine that’s more attuned to Americans’ preference for bigger cups of joe three years ago.
Starbucks in November agreed to sell tea brand Tazo to Nestle rival Unilever for $384 million.
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