Starbucks Taps Seattle's Best

SEATTLE -- Starbucks Corp. strengthened its clout as the world's largest coffee house chain, saying it was acquiring rival Seattle Coffee Co.'s North American operations for $72 million from parent company AFC Enterprises Inc.
Starbucks will take control of 150 U.S. and Canadian Seattle Coffee locations, preserving both Seattle's Best Coffee and Torrefazione Italia Coffee brands, rather than converting the units and products to Starbucks.

"It's business as usual for us," said Starbucks spokeswoman Audrey Lincoff. "We will continue to operate those stores and those brands."

The deal boosts Starbucks' coffee shop base by 2.3 percent from its current 6,458 units. Seattle Coffee's strong wholesale coffee business, with distribution to 12,000 outlets, could be more significant, Reuters reported.

"This is more for solidifying their foodservice and grocery wholesale offerings, not so much for the retail locations," Dan Geiman, an analyst at McAdams Wright Ragen, told the news agency. "It's another avenue that Starbucks can take toward reaching its goal of 20 percent [annual] revenue growth."

AFC, which runs the Popeye's chicken chain, said the transaction will allow it to refocus on its core restaurant, bakery and cafe franchises. The company intends to use proceeds from the transaction to pay down debt and repurchase its stock.

Seattle Coffee currently operates 51 company-owned Seattle's Best Coffee and 21 Torrefazione cafes in North America. Starbucks will also acquire 78 franchised Seattle's Best retail outlets. AFC will retain control of 93 Seattle's Best Coffee franchised cafes in eight countries. The companies aim to close the transaction within 90 days.