Chipotle, Starbucks shares volatile after report of potential takeover

Investing.com -- Shares of Chipotle Mexican Grill (NYSE: CMG) and Starbucks (NASDAQ: SBUX) swung sharply Thursday following a Financial Times report that Starbucks has explored a potential acquisition of the burrito chain.

Chipotle shares initially jumped as much as 8% following the report, while Starbucks fell as much as 6%. Both stocks later pared those moves as investors weighed the potential implications of a deal.

Whispers of a potential tie-up had circulated previously, including a report from Semafor, but the speculation was largely dismissed by the market at the time. The Financial Times report carries greater weight, indicating that Starbucks has worked with advisers in recent months on a potential proposal for Chipotle, which currently has a market value of nearly $39 billion.

The sharp divergence in the stocks, however, could complicate the financial mechanics of a potential transaction. Starbucks’ declining share price would reduce the value of any equity used as consideration, while Chipotle’s rally increases the price Starbucks would need to pay for the company. The status of Starbucks’ plans, including whether it has made a formal offer, remains unclear.

A deal would reunite Starbucks CEO Brian Niccol with the fast-food chain he led for six years. Niccol left Chipotle to take over as Starbucks chief executive in August 2024. Since then, Chipotle shares have nearly halved in value.

The combination would create a restaurant giant with nearly $50 billion in combined annual sales based on last year’s figures. Starbucks operates about 41,000 owned and licensed stores globally, with roughly two-fifths located in the U.S., while almost all of Chipotle’s roughly 4,200 restaurants are domestic.

If completed, the transaction would dwarf Burger King’s $11.4 billion acquisition of Tim Hortons in 2014 and rank as the largest restaurant-sector acquisition on record. The Financial Times cautioned, however, that a transaction of such scale may never materialize given the complexity of combining two major consumer brands.

Starbucks declined to comment on the report, while Chipotle did not immediately respond to inquiries.

Original Article

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